AUDITED ANNUAL FINANCIAL STATEMENTS

For the year ended 30 June 2019 TABLE OF CONTENTS

NR CONTENT PAGE

1. GENERAL INFORMATION 3 - 5

2. APPROVAL OF FINANCIAL STATEMENTS 6

3. STATEMENT OF FINANCIAL POSITION 7

4. STATEMENT OF FINANCIAL PERFORMANCE 8

5. CASH FLOW STATEMENT 9

6. STATEMENT OF CHANGES IN NET ASSETS 10

7. STATEMENT OF COMPARISON OF BUDGET AND ACTUAL AMOUNTS 11 - 13

8. ACCOUNTING POLICIES 14 - 53

9. NOTES APPLYING TO ANNUAL FINANCIAL STATEMENTS 54 - 120

10. APPENDICES

A) SCHEDULE OF EXTERNAL LOANS AS AT 30 JUNE 2018 121

RECONCILIATION OF BUDGETED FINANCIAL PERFORMANCE (REVENUE AND B1) 122 EXPENDITURE BY STANDARD CLASSIFICATION)

RECONCILIATION OF BUDGETED FINANCIAL PERFORMANCE (REVENUE AND B2) 123 EXPENDITURE BY MUNICIPAL VOTE)

RECONCILIATION OF BUDGETED FINANCIAL PERFORMANCE (REVENUE AND B3) 124 EXPENDITURE)

RECONCILIATION OF BUDGETED CAPITAL EXPENDITURE BY VOTE, STANDARD B4) 125 - 126 CLASSIFICATION AND FUNDING

B5) RECONCILIATION OF BUDGETED CASH FLOW 127

DISCLOSURES OF GRANTS AND SUBSIDIES IN TERMS OF SECTION 123 OF THE 128 C) MFMA, 56 OF 2003

Audited Annual Financial Statements for the year ended 30 June 2019 2

GENERAL INFORMATION

MEMBERS OF THE EXECUTIVE MAYORAL COMMITTEE COUNCILLOR PORTFOLIO

CJ POOLE EXECUTIVE MAYOR AND CHAIRPERSON OF MAYORAL COMMITTEE

GC COMBRINK DEPUTY EXECUTIVE MAYOR & MAYORAL COMMITTEE MEMBER OF FINANCE PORTFOLIO COMMITTEE, CHAIRPERSON FINANCE COMMITTEE

MA ANDREAS MAYORAL COMMITTEE MEMBER OF RURAL DEVELOPMENT

E GOUWS MAYORAL COMMITTEE MEMBER OF SOCIAL SERVICES

L WILLEMSE MAYORAL COMMITTEE MEMBER OF HUMAN SETTLEMENTS AND PROPERTY DEVELOPMENT

C KEARNS MAYORAL COMMITTEE MEMBER OF ENVIRONMENT AND OPEN SPACES

LP MAKOENA MAYORAL COMMITTEE MEMBER OF CORPORATE SERVICES

R SMUTS MAYORAL COMMITTEE MEMBER OF PUBLIC SAFETY

RH VAN NIEUWENHUIZEN MAYORAL COMMITTEE MEMBER OF COMMUNICATION AND INTERGOVERNMENTAL RELATIONS

JF LE ROUX MAYORAL COMMITTEE MEMBER OF ENGINEERING SERVICES

J MILLER MAYORAL COMMITTEE MEMBER OF PLANNING & ECONOMIC DEVELOPMENT AND TOURISM

LT VAN NIEKERK MAYORAL COMMITTEE MEMBER OF RECREATION, ARTS AND CULTURE

Audited Annual Financial Statements for the year ended 30 June 2019 3

COUNCIL MEMBERS NR SURNAME INITIALS NR SURNAME INITIALS

1 ABRAHAMS AW 34 MATTHEE HJN 2 ADRIAANSE MM 35 MATTHEE J 3 AFRIKA AF 36 MBENENE NP 4 ANDERSON JV 37 MDUNUSIE MN 5 ANDREAS MA 38 MEYER WPD 6 ARNOLDS RB 39 MILLER J 7 BEKEER A 40 MKABILE ND 8 BESTER TG 41 MOKOENA LP 9 BLANCKENBERG DS 42 MPULANYANA TR 10 BOOYSEN vc 43 NIEHAUS LW 11 BUCKLE AML 44 NOBULA MD 12 COMBRINK GC 45 NQORO TZ 13 CUPIDO FP 46 NZELE LV 14 CUPIDO PBA 47 POOLE CJ 15 DE GOEDE HR 48 RENS SC 16 DE WET J 49 RICHARDS AM

I 17 DUBA BP so ROSS s l 18 FORD GH 51 SAMBOKWE LS I 19 GEORGE NN 52 SAUERMAN ND i 20 GOUWS E 53 SEPTEMBER SE ! 21 JACOBS F 54 SMIT J !22 JONAS sx 55 SMIT WE ! 23 KEARNS C 56 SMUTS R I 24 KLAAS MT 57 SOLOMONS EA 25 KOEGELENBERG RA 58 STOWMAN AC 26 KOTZE HJ 59 VAN NIEKERK LT 27 KROUTZ C 60 VAN NIEUWENHUVZEN RH 28 LANDU L 61 VAN SATEN AJ 29 LE HOE MJ 62 VIKA M 30 LE ROUX JF 63 WILLEMSE L 31 LUGQOLA A 64 WINDVOGEL E 32 MANGENA TC 65 ZIKHALI N 33 MASOKA ZL

I certify that the remuneration, allowances and benefits of the above Councillors as disclosed in note 32 of the Annual Financial Statements are within the upper limits of the framework envisaged in section 219 of the constitution, read with the Remuneration of Public Office Bearers Act and the Minister of

vernments determination in accordance with this Act. �RANDT L �CCOUNTING OFFICER

------Audited Annual Financial Statements for the year ended 30 June 2019 ------4 MEMBERS OF THE AUDIT COMMITTEE

MS K MONTGOMERY CHAIRPERSON MR R NAJJAAR MEMBER MR R NICHOLLS MEMBER MR C WHITTLE MEMBER

OTHER INFORMATION

AUDITORS THE AUDITOR-GENERAL OF SOUTH AFRICA BANKERS FIRST NATIONAL BANK DEMARCATION CODE WC023 REGISTERED HEAD OFFICE DRAKENSTEIN MUNICIPALITY CIVIC CENTRE, PAARL PHYSICAL ADDRESS BERG RIVER BOULEVARD PAARL 7646 POSTAL ADDRESS P O BOX 1 PAARL 7622 TELEPHONE (021) 807 - 4500 FAX (021) 872 - 8054 CITY MANAGER DR JH LEIBBRANDT CHIEF FINANCIAL OFFICER MR J CARSTENS EXECUTIVE MAYOR COUNCILLOR CJ POOLE EXECUTIVE DEPUTY MAYOR COUNCILLOR GC COMBRINK SPEAKER COUNCILLOR AC STOWMAN

EXECUTIVE MANAGEMENT

POSITION NAME CITY MANAGER DR JH LEIBBRANDT CHIEF FINANCIAL OFFICER MR J CARSTENS EXECUTIVE DIRECTOR: CORPORATE SERVICES MR S JOHAAR EXECUTIVE DIRECTOR: PLANNING & DEVELOPMENT MS L WARING EXECUTIVE DIRECTOR: ENGINEERING SERVICES MR C GELDENHUYS / C LOTZ EXECUTIVE DIRECTOR: COMMUNITY SERVICES MR G ESAU

Audited Annual Financial Statements for the year ended 30 June 2019 5

APPROVAL OF FINANCIAL STATEMENTS

I am responsible for the preparation of these Annual Financial Statements, which are

set out on pages 1 to 120, in terms of Section 126(1) of the Municipal Finance

Management Act (Act No 56 of 2003) and which I have signed on behalf of the

municipality.

31 August 2019

------Audited Annual Financial Statements for the year ended 30 June 2019 ------6 DRAKENSTEIN MUNICIPALITY STATEMENT OF FINANCIAL POSITION AT 30 JUNE 2019 Note 2019 2018 RESTATED R R ASSETS Non-current assets 6,123,366,467 5,745,867,616 Property, Plant and Equipment 11 6,037,650,656 5,653,641,447 Heritage assets 14 41,223,700 41,223,700 Intangible assets 12 5,792,294 5,227,677 Investment property 13 37,740,000 44,390,000 Non-current investments 15 124,968 128,762 Non-current receivables from exchange transactions 16 834,850 1,256,030

Current assets 449,443,926 639,995,118 Inventory 17 25,326,036 24,687,641 Trade and other receivables from exchange transactions 19 276,075,704 248,832,757 Receivables from non-exchange transactions 20 82,038,478 88,573,929 Current portion of non-current receivables 16 150,118 329,048 Cash and cash equivalents 21 65,853,590 229,099,916 VAT receivable 18 0 48,471,827 Total Assets 6,572,810,393 6,385,862,734

NET ASSETS AND LIABILITIES Non-current liabilities 1,802,466,208 1,655,409,656 Borrowings 5 1,446,315,652 1,333,295,042 Non-current employee benefits 6 169,980,000 155,060,000 Non-current provisions 7 183,600,026 165,816,002 Non-current finance lease liability 5 2,570,530 1,238,612 Current liabilities 736,542,611 652,185,778 Consumer deposits 8 57,004,529 44,822,374 Trade and other payables from exchange transactions 9 362,975,484 316,821,152 Unspent conditional grants and receipts 10 31,354,236 53,749,523 Current portion of non-current borrowings 5 184,388,046 171,335,664 Current portion of finance lease liabilities 5 2,657,091 3,191,384 VAT payable (Control) 18 4,000,227 0 Current employee benefits 6 94,162,998 62,265,681 Net assets 4,033,801,573 4,078,267,301 Reserves and funds 3 1,513,286,226 1,548,084,422 Housing development fund 2 16,788,195 20,527,483 Accumulated surplus / (deficit) 4 2,503,727,153 2,509,655,396 Total Net Assets and Liabilities 6,572,810,393 6,385,862,734

7 DRAKENSTEIN MUNICIPALITY STATEMENT OF FINANCIAL PERFORMANCE FOR THE YEAR ENDED 30 JUNE 2019

Note 2019 2018 RESTATED R R REVENUE Revenue from exchange transactions Service charges 23 1,332,489,665 1,287,024,316 Sale of Goods and Rendering of Services 24 16,001,550 10,924,234 Rental from fixed assets 25 34,245,803 30,473,307 Finance income and dividends 26 23,798,567 39,083,078 Operational revenue (exchange) 30 9,309,022 3,695,012 Licences and permits 28 17,643,030 17,329,103

Revenue from non-exchange transactions Property rates 22 271,147,343 245,517,386 Surcharges and taxes 1,339,281 1,453,967 Fines, penalties and forfeits 27 75,253,291 92,938,480 Transfers and subsidies 29 345,188,088 304,189,823 Operational revenue ( non - exchange) 30 14,369,654 7,825,306 Total Revenue 2,140,785,294 2,040,454,013

EXPENDITURE Employee related costs 31 671,960,597 567,573,581 Councillor related costs 32 29,945,188 28,062,166 Depreciation and amortisation 34 210,624,362 195,752,508 Operating leases 31,688,152 30,681,372 Interest paid 36 158,386,286 132,449,712 Bulk purchases : Electricity 37 673,707,616 632,000,521 Bulk purchases : Water 37 4,306,442 2,738,869 Contracted services 38 146,585,479 157,906,148 Inventory 57,435,330 53,284,906 Transfers and subsidies : operational expenditure 22,656,356 10,531,922 Operational cost 39 74,857,071 83,431,614 Total Expenditure 2,082,152,878 1,894,413,317

GAINS AND LOSSES Impairment losses on financial assets 33 105,608,249 128,634,998 Impairment losses on PPE, IA, IP & HA 35 1,006,785 27,983,597 (Gains) / losses on disposal of PPE, IA, IP & HA Gains /(losses) on(4,509,285) disposal of PPE, IA, 24,306,180IP & HA Fair value adjustments Financial Assets 3,795 4,228 Fair value adjustments Investment Property (1,950,000) (3,740,000) Gains/(losses) on Inventory Gains/(losses) on 2,306,042Inventory (22,350) (Gains) from assets from non-exchange transactions (39,911) (291,000) 102,425,674 176,875,653

Total Surplus / (Deficit) from operations (43,793,258) (30,834,957)

8 CASH FLOW STATEMENT FOR THE YEAR ENDED 30 JUNE 2019

Note 2019 2018 RESTATED R R CASH FLOW FROM OPERATING ACTIVITIES RECEIPTS Property rates -2.7E+08 273,011,822 241,880,363 Sale of goods and services -1.3E+09 1,252,219,365 1,147,612,711 Grants received -3E+08 295,890,227 307,337,377 Interest received -2.4E+07 23,783,447 39,067,958 Dividends received -15120 15,120 15,120 Other receipts and fines received -1.1E+08 106,060,984 109,511,915 Net VAT received -5.2E+07 52,472,054 0 0 PAYMENTS 0 Employee cost 6.5E+08 (654,884,120) (576,357,358) Suppliers (964,416,531) (862,058,015) Interest paid ## 1.9E+07 (144,220,981) (124,741,177) Net VAT paid ## -9816297 0 (9,810,835) NET CASH FROM OPERATING ACTIVITIES # 40 239,931,389 272,458,058

CASH FLOWS FROM INVESTING ACTIVITIES

Purchase of property, plant and equipment and intangible assets # ###### (576,123,335) (651,721,214) Proceeds on disposal of property, plant and equipment -3.3E+07 33,471,669 173,220 Decrease/(Increase) in non-current receivables # 489985 421,180 911,165 0 NET CASH FROM INVESTING ACTIVITIES # (542,230,486) (650,636,829)

CASH FLOWS FROM FINANCING ACTIVITIES

(Decrease) / Increase in long-term liabilities # 1.9E+08 126,072,992 314,142,342 Increase in consumer deposits # -1E+07 12,182,156 3,415,058 Increase/(Decrease) in Financial Lease Liability # -60129.9 797,625 440,765

NET CASH FROM FINANCING ACTIVITIES # 139,052,772 317,998,165

NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS ## (163,246,325) (60,180,605)

Cash and cash equivalents at the beginning of the year 21 229,099,916 289,280,521 Cash and cash equivalents at the end of the year 21 65,853,591 229,099,916

9 DRAKENSTEIN MUNICIPALITY STATEMENT OF CHANGES IN NET ASSETS FOR THE YEAR ENDED 30 JUNE 2019

Housing Total Accumulated Revaluation Reserve Total Development Fund Surplus

R R R R

OPENING BALANCES 30 JUNE 2017 24,102,258 1,233,155,248 2,501,877,481 3,759,134,987

PRIOR YEAR ADJUSTMENTS Correction of unspent grants 0 0 7,330,093 7,330,093 Correction of water debtors 0 0 (2,965,543) (2,965,543) Correction of retention 0 0 13,826,019 13,826,019 Correction of receivables 0 0 (262,836) (262,836) Correction on sale of PPE 0 0 8,666,111 8,666,111 Correction of PPE 0 (46,544,943) (26,904,787) (73,449,731) Correction of intangible assets 0 0 350,741 350,741 Correction of Standby allowance 0 0 (612,436) (612,436) Correction of Retention 0 0 1,016,566 1,016,566 RESTATED BALANCES 30 JUNE 2017 24,102,258 1,186,610,305 2,502,321,409 3,713,033,972

2018 Net surplus/(deficit) for the year (Restated) 0 0 (30,834,957) (30,834,957) Asset Disposals 0 (4,935,801) 4,935,801 0 Revaluations 396,270,715 0 396,270,715 Transfer to Housing Development Fund (3,574,776) 0 3,372,346 (202,430) Offsetting of Depreciation 0 (29,860,797) 29,860,797 0 RESTATED BALANCES 30 JUNE 2018 20,527,483 1,548,084,421 2,509,655,396 4,078,267,300

2019 Net surplus/(deficit) for the year 0 0 (43,793,258) (43,793,258) Asset Disposals 0 (5,121,476) 5,121,476 0 Transfer to Housing Development Fund (3,739,288) 0 3,066,820 (672,468) Offsetting of Depreciation 0 (29,676,720) 29,676,720 0 BALANCE AT 30 JUNE 2019 16,788,195 1,513,286,226 2,503,727,154 4,033,801,574 NOTE REFERENCE 2 3 4

10 DRAKENSTEIN MUNICIPALITY STATEMENT OF COMPARISON OF BUDGET AND ACTUAL AMOUNTS FOR THE YEAR ENDED 30 JUNE 2019

DESCRIPTIONS Original Final Actual Outcome Actual Outcome Total Budget Adjustments Shifting Virement Final Actual Unauthorised Variance as % of as % of Budget Adjustments Budget of funds Budget Outcome Expenditure Final Budget Original Budget R R R R R R R R R FINANCIAL POSITION Current Assets Inventories 37,645,089 0 37,645,089 0 0 37,645,089 25,326,036 0 (12,319,053) 67.28% 67.28% Receivables from Exchange Transactions 281,455,673 0 281,455,673 0 0 281,455,673 276,075,704 0 (5,379,969) 98.09% 98.09% Receivables from Non-exchange Transactions 0 0 0 0 0 0 82,038,478 0 82,038,478 0.00% 0.00% Other debtors 123,173,349 0 123,173,349 0 0 123,173,349 0 0 (123,173,349) 0.00% 0.00% Cash and Cash Equivalents 195,800,711 6,649,384 202,450,095 0 51,537,389 253,987,484 65,853,590 0 (188,133,894) 25.93% 33.63% Current Portion of Long-term Receivables 325,000 0 325,000 0 0 325,000 150,118 0 (174,882) 46.19% 46.19%

Non-Current Assets Property, Plant and Equipment 6,080,923,547 (24,934,342) 6,055,989,205 0 (51,537,389) 6,004,451,816 6,037,650,656 0 33,198,839 100.55% 99.29% Intangible Assets 7,571,657 2,290,953 9,862,610 0 0 9,862,610 5,792,294 0 (4,070,316) 58.73% 76.50% Investment Property 45,076,500 0 45,076,500 0 0 45,076,500 37,740,000 0 (7,336,500) 83.72% 83.72% Heritage Assets 0 0 0 0 0 0 41,223,700 0 41,223,700 0.00% 0.00% Non-current Investments 133,000 0 133,000 0 0 133,000 124,968 0 (8,032) 93.96% 93.96% Other non-current assets 36,393,170 0 36,393,170 0 0 36,393,170 0 0 (36,393,170) 0.00% 0.00% Long-term Receivables 2,025,124 0 2,025,124 0 0 2,025,124 834,850 0 (1,190,274) 41.22% 41.22%

Total Assets 6,810,522,820 (15,994,005) 6,794,528,815 0 0 6,794,528,815 6,572,810,393 0 (221,718,422) 96.74% 96.51%

Current Liabilities Consumer Deposits 43,710,745 0 43,710,745 0 0 43,710,745 57,004,529 0 13,293,784 130.41% 130.41% Provisions 23,325,229 0 23,325,229 0 0 23,325,229 0 0 (23,325,229) 0.00% 0.00% Payables 241,673,526 0 241,673,526 0 0 241,673,526 362,975,484 0 121,301,958 150.19% 150.19% Unspent Conditional Grants and Receipts 0 0 0 0 0 0 31,354,236 0 31,354,236 0.00% 0.00% VAT Payable 0 0 0 0 0 0 4,000,227 0 4,000,227 0.00% 0.00% Retirement Benefit Liabilities - short term portion 0 0 0 0 0 0 94,162,998 0 94,162,998 0.00% 0.00% Current Portion of Long-term Liabilities 178,805,737 0 178,805,737 0 0 178,805,737 184,388,046 0 5,582,309 103.12% 103.12% Current Portion of Finance leases 0 0 0 0 0 0 2,657,091 0 2,657,091 0.00% 0.00% Non-Current Liabilities Long-term Liabilities 1,482,840,651 0 1,482,840,651 0 0 1,482,840,651 1,446,315,652 0 (36,524,999) 97.54% 97.54% Retirement Benefit Liabilities 0 0 0 0 0 0 169,980,000 0 169,980,000 0.00% 0.00% Non-current Provisions 342,511,496 0 342,511,496 0 0 342,511,496 183,600,026 0 (158,911,470) 53.60% 53.60% Finance lease liability 0 0 0 0 0 0 2,570,530 0 2,570,530 0.00% 0.00% Total Liabilities 2,312,867,384 0 2,312,867,384 0 0 2,312,867,384 2,539,008,819 0 226,141,435 109.78% 109.78%

Total Assets and Liabilities 4,497,655,436 (15,994,005) 4,481,661,431 0 0 4,481,661,431 4,033,801,574 0 (447,859,857) 90.01% 89.69%

Net Assets (Equity) Statutory Funds 0 0 0 0 0 0 16,788,195 0 16,788,195 0.00% 0.00% Reserves 2,627,469,701 17,325,000 2,644,794,701 0 0 2,644,794,701 1,513,286,226 0 (1,131,508,475) 57.22% 57.59% Accumulated Surplus / (Deficit) 1,870,185,735 (33,319,005) 1,836,866,730 0 0 1,836,866,730 2,503,727,153 0 666,860,423 136.30% 133.88%

Total Net Assets 4,497,655,436 (15,994,005) 4,481,661,431 0 0 4,481,661,431 4,033,801,573 0 (447,859,858) 90.01% 89.69% 0

11 DRAKENSTEIN MUNICIPALITY STATEMENT OF COMPARISON OF BUDGET AND ACTUAL AMOUNTS FOR THE YEAR ENDED 30 JUNE 2019

DESCRIPTIONS Original Final Actual Outcome Actual Outcome Total Budget Adjustments Shifting Virement Final Actual Unauthorised Variance as % of as % of Budget Adjustments Budget of funds Budget Outcome Expenditure Final Budget Original Budget FINANCIAL PERFORMANCE Revenue from Non-exchange Transactions Property Rates 305,830,748 (29,848,722) 275,982,026 0 0 275,982,026 271,147,343 0 4,834,683 98.25% 88.66% Fines 69,847,415 28,374,831 98,222,246 0 0 98,222,246 75,253,291 0 22,968,955 76.62% 107.74% Licences and Permits 4,640,127 (560,842) 4,079,285 0 0 4,079,285 3,462,960 0 616,326 84.89% 74.63% Government Grants and Subsidies Received 265,112,381 (6,276,854) 258,835,527 0 0 258,835,527 182,494,744 0 76,340,783 70.51% 68.84%

Revenue from Exchange Transactions Service Charges 1,531,917,858 (132,837,350) 1,399,080,508 0 0 1,399,080,508 1,357,189,640 0 41,890,868 97.01% 88.59% Rental of Facilities and Equipment 3,726,209 111,881 3,838,090 0 0 3,838,090 9,505,279 0 (5,667,189) 247.66% 255.09% Interest Earned - External Investments 22,000,000 (10,000,000) 12,000,000 0 0 12,000,000 14,223,574 0 (2,223,574) 118.53% 64.65% Interest Earned - Outstanding Debtors 15,977,643 (4,347,568) 11,630,075 0 0 11,630,075 10,902,171 0 727,904 93.74% 68.23% Other Income 86,997,435 13,480,070 100,477,505 0 0 100,477,505 120,935,904 0 (20,458,399) 120.36% 139.01% Gains on Disposal of Property, Plant and Equipment 250,000 39,590,653 39,840,653 0 0 39,840,653 42,515,071 0 (2,674,418) 106.71% 17006.03% Gains from assets from non exchange transactions 0 0 0 0 0 0 1,978,672 0 (1,978,672) 0.00% 0.00%

Total Revenue 2,306,299,816 (102,313,901) 2,203,985,915 0 0 2,203,985,915 2,089,608,649 0 114,377,266 94.81% 90.60%

Expenditure Employee Related Costs 625,426,030 11,755,194 637,181,224 0 0 637,181,224 669,024,810 0 (31,843,586) 105.00% 106.97% Remuneration of Councillors 31,229,363 (1,081,966) 30,147,397 0 0 30,147,397 29,945,188 0 202,209 99.33% 95.89% Depreciation and Amortisation 201,673,156 18,753,287 220,426,443 0 0 220,426,443 210,624,362 0 9,802,081 95.55% 104.44% Finance Costs 144,574,379 21,685,142 166,259,521 0 0 166,259,521 158,386,286 0 7,873,235 95.26% 109.55% Bulk Purchases 712,439,900 (30,578,815) 681,861,085 0 0 681,861,085 678,014,058 0 3,847,027 99.44% 95.17% Contracted Services 293,276,792 (69,931,615) 223,345,177 0 0 223,345,177 143,311,694 0 80,033,483 64.17% 48.87% Grants and Subsidies Paid 20,563,462 3,292,423 23,855,885 0 0 23,855,885 22,533,535 0 1,322,350 94.46% 109.58% Impairment of Financial assets 100,409,320 29,139,343 129,548,663 0 0 129,548,663 105,608,249 0 23,940,414 81.52% 105.18% General Expenses 208,880,752 (16,388,423) 192,492,329 0 0 192,492,329 197,690,244 0 (5,197,915) 102.70% 94.64% Other Materials 51,193,184 6,330,272 57,523,456 0 0 57,523,456 57,435,330 0 88,126 99.85% 112.19% Loss on Disposal of Property, Plant and Equipment 2,000,000 6,900,000 8,900,000 0 0 8,900,000 10,988,574 0 (2,088,574) 123.47% 549.43%

Total Expenditure 2,391,666,338 (20,125,158) 2,371,541,180 0 0 2,371,541,180 2,283,562,331 0 87,978,849 96.29% 95.48%

Surplus/(Deficit) (85,366,522) (82,188,743) (167,555,265) 0 0 (167,555,265) (193,953,682) 0 26,398,417 115.76% 227.20% Transfers Recognised - Capital 84,933,000 76,064,275 160,997,275 0 0 160,997,275 150,160,424 0 10,836,851 93.27% 176.80% Contributions Recognised - Capital and Contributed Assets 0 0 0 0 0 0 0 0 0

Surplus/(Deficit) for the Year (433,522) (6,124,468) (6,557,990) 0 0 (6,557,990) (43,793,258) 0 37,235,268 667.78% 10101.74%

12 DRAKENSTEIN MUNICIPALITY STATEMENT OF COMPARISON OF BUDGET AND ACTUAL AMOUNTS FOR THE YEAR ENDED 30 JUNE 2019

DESCRIPTIONS Original Final Actual Outcome Actual Outcome Total Budget Adjustments Shifting Virement Final Actual Unauthorised Variance as % of as % of Budget Adjustments Budget of funds Budget Outcome Expenditure Final Budget Original Budget CAPITAL EXPENDITURE PER FUNCTION Executive and Council 0 252,735 252,735 0 (36,752) 215,983 215,981 0 2 100.0% 0.0% Finance and Administration 33,888,220 5,393,290 39,281,510 0 (3,146,598) 36,134,912 36,093,352 0 41,560 99.9% 106.5% Internal Audit 0 59,506 59,506 0 0 59,506 59,506 0 0 100.0% 0.0% Community and Social Services 7,935,779 (2,798,755) 5,137,024 0 (353,267) 4,783,757 4,783,751 0 6 100.0% 60.3% Sport and Recreation 44,500,893 (11,915,239) 32,585,654 0 (9,108,420) 23,477,234 23,477,213 0 21 100.0% 52.8% Public Safety 3,589,565 900,669 4,490,234 0 (1,500,993) 2,989,241 2,988,448 0 793 100.0% 83.3% Housing 16,800,000 49,363,480 66,163,480 0 (17,471,919) 48,691,561 38,737,059 0 9,954,502 79.6% 230.6% Health 0 0 0 0 0 0 0 0 0 0.0% 0.0% Planning and Development 0 296,843 296,843 0 (130,995) 165,848 165,848 0 1 100.0% 0.0% Road Transport 61,957,971 21,523,491 83,481,462 0 (5,963,272) 77,518,190 77,518,186 0 4 100.0% 125.1% Enviromental Protection 0 0 0 0 0 0 0 0 0 0.0% 0.0% Energy Sources 129,469,565 6,969,834 136,439,399 0 0 136,439,399 155,203,667 (18,764,268) (18,764,268) 113.8% 119.9% Water Management 105,282,100 71,058,037 176,340,137 0 (2,300,920) 174,039,217 174,039,211 0 6 100.0% 165.3% Waste Water Management 47,616,273 20,072,501 67,688,774 0 (11,524,253) 56,164,521 56,164,519 0 2 100.0% 118.0% Waste Management 3,000,000 86,792 3,086,792 0 0 3,086,792 3,086,791 0 1 100.0% 102.9% Other 0 0 0 0 0 0 0 0 0 0.0% 0.0% Total Sources of Capital Funds 454,040,366 161,263,184 615,303,550 0 (51,537,389) 563,766,161 572,533,531 (8,767,370) (8,767,370) 101.6% 126.1%

CASH FLOW Cash Flows from/(used in) Operating Activities 274,979,792 (71,719,327) 203,260,465 0 0 203,260,465 239,931,389 0 36,670,924 118.0% 87.3% Cash Flows from/(used in) Investing Activities (408,386,329) (105,621,373) (514,007,702) 0 51,537,389 (462,470,313) (542,230,486) 0 (79,760,173) 117.2% 132.8% Cash Flows from/(used in) Financing Activities 85,834,917 0 85,834,917 0 0 85,834,917 139,052,773 0 53,217,856 162.0% 162.0% (47,571,620) (177,340,700) (224,912,320) 0 51,537,389 (173,374,931) (163,246,325) 0 (10,128,606) 94.2% 343.2% Cash/Cash equivalents at the year begin: 243,372,332 183,990,084 427,362,416 0 0 427,362,416 229,099,916 0 198,262,500 53.6% 94.1% Cash/cash equivalents at the year end: 195,800,711 6,649,384 202,450,096 0 51,537,389 253,987,485 65,853,591 0 188,133,893 25.9% 33.6%

13 DRAKENSTEIN MUNICIPALITY SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES TO THE ANNUAL FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019

1. BASIS OF PRESENTATION

The annual financial statements were prepared in accordance with Standards of Generally Recognised Accounting Practice (GRAP), issued by the Accounting Standards Board in accordance with Section 122(3) of the Municipal Finance Management Act, (Act No 56 of 2003).

The annual financial statements were prepared on the accrual basis of accounting and incorporate the historical cost conventions as the basis of measurement, except where specified otherwise.

In the absence of an issued and effective Standards of GRAP, accounting policies for material transactions, events or conditions were developed in accordance with GRAP 3 as read with Directive 5. Assets, liabilities, revenues and expenses were not offset, except where offsetting is either required or permitted by a Standard of GRAP.

The principal accounting policies, applied in the preparation of the annual financial statements, are set out below. These accounting policies are consistent with those applied in the preparation of the prior year annual financial statements, unless specified otherwise. Details of any changes in the accounting policies are provided in the notes on changes in accounting policies.

These standards are summarised as follows: Reference Topic GRAP Framework Framework for the preparation and presentation of financial statements GRAP 1 Presentation of Financial Statements GRAP 2 Cash Flow Statements GRAP 3 Accounting Policies, Changes in Accounting Estimates and Errors GRAP 4 The Effects of Changes in Foreign Exchange Rates GRAP 5 Borrowing Costs GRAP 6 Consolidated and Separate Financial Statements GRAP 7 Investment in Associates GRAP 8 Investment in Joint Ventures GRAP 9 Revenue from Exchange Transactions GRAP 10 Financial Reporting in Hyperinflationary Economies

Audited Annual Financial Statements for the year ended 30 June 2019 14

Reference Topic GRAP 11 Construction Contracts GRAP 12 Inventories GRAP 13 Leases GRAP 14 Events After the Reporting Date GRAP 16 Investment Property GRAP 17 Property, Plant and Equipment GRAP 19 Provisions, Contingent Liabilities and Contingent Assets GRAP 21 Impairment of Non-cash-generating Assets GRAP 23 Revenue from Non-exchange Transactions GRAP 24 Presentation of Budget Information in Financial Statements GRAP 25 Employee Benefits GRAP 26 Impairment of Cash-generating Assets GRAP 27 Agriculture GRAP 31 Intangible Assets GRAP 100 Discontinued Operations GRAP 103 Heritage Assets GRAP 104 Financial Instruments IFRS 4 Insurance contracts IAS 12 Income taxes IGRAP 1 Applying the probable test on initial recognition of revenue IGRAP 2 Changes in Existing Decommissioning, Restoration and Similar Liabilities IGRAP 3 Determining whether an Arrangement Contains a lease IGRAP 4 Rights to Interest Arising from Decommissioning, Restoration and Environmental Rehabilitation Funds IGRAP 5 Applying the Restatement Approach under the Standard of GRAP on Financial Reporting in Hyperinflationary Economies IGRAP 6 Loyalty Programmes IGRAP 7 The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction IGRAP 8 Agreements for the construction of Assets from Exchange Transactions IGRAP 9 Distributions of Non-cash Assets to Owners IGRAP 10 Assets Received from Customers IGRAP 11 Consolidations – Special Purpose Entities IGRAP 12 Jointly Controlled Entities – Non-monetary Contributions by Ventures IGRAP 13 Operating Leases – Incentives

Audited Annual Financial Statements for the year ended 30 June 2019 15

Reference Topic IGRAP 14 Evaluating the Substance of Transactions Involving the Legal Form of a Lease IGRAP 15 Revenue – Barter Transactions Involving Advertising Services IGRAP 16 Intangible Assets – Website Costs IFRIC 12 Service concession arrangements SIC 25 Income taxes – Changes in the status of an enterprise or its shareholders SIC 29 Disclosure service concession Directive 1 Repeal of existing transitional provisions in, and consequential amendments to, standards of GRAP Directive 3 Transitional provisions for high capacity municipalities Directive 5 Determine the GRAP reporting framework Directive 7 The Application of Deemed Cost Directive 11 Changes in the Measurement Bases Following the Initial Adoption of the Standards of GRAP ASB Guide 1 Guideline on accounting for public private partnerships

The Cash Flow Statement is prepared using the direct method, whereby major classes of gross cash receipts and gross cash payments are disclosed.

Accounting policies for material transactions, events or conditions not covered by the above GRAP standards have been developed in accordance with GRAP 3. Where required, accounting policies were developed for standards of GRAP that have been issued by the Accounting Standards Board, but for which an effective date have not been determined by the Minister of Finance.

2. STANDARDS, AMENDMENTS TO STANDARDS AND INTERPRETATIONS ISSUED BUT NOT YET EFFECTIVE

The following GRAP standards have been issued in prior periods, but are not yet effective and have not been early adopted by the municipality:

Reference Topic Effective date GRAP 18 Segment Reporting - issued March 2005 1 July 2020 GRAP 20 Related Party Disclosures (Revised) 1 July 2019 GRAP 32 Service Concession Arrangement Grantor 1 July 2019 GRAP 108 Statutory Receivables 1 July 2019 GRAP 109 Accounting by Principals and Agents 1 July 2019

Audited Annual Financial Statements for the year ended 30 June 2019 16

Reference Topic Effective date GRAP 110 Living and Non-living Resources 1 July 2020 IGRAP 17 Service Concession Arrangements Where a 1 July 2019 Grantor Controls a Significant Residual Interest in an Asset IGRAP 18 Recognition and Derecognition of Land 1 July 2019 IGRAP 19 Liabilities to Pay Levies 1 July 2019

All other standards as listed above will only be effective on the date it is announced by the Minister of Finance.

The ASB issued the guideline on Accounting for Arrangements Undertaken in terms of the National Housing Programme during the 2018/2019 financial year. Although not yet effective and not been early adopted by the municipality, certain principles contained within the guide necessitated the correction of certain previously accepted accounting principles applied in prior years, related to BNG housing.

The ASB Directive 5 sets out the principles for the application of the GRAP 3 guidelines in the determination of the GRAP Reporting Framework hierarchy, as set out in the standard of GRAP 3 on Accounting Policies, Changes in Accounting Estimates and Errors.

Where a standard of GRAP is approved as effective, it replaces the equivalent statement of International Public Sector Accounting Standards Board or, International Financial Reporting Standards. Where a standard of GRAP has been issued, but is not in effect, an entity may select to apply the principles established in that standard in developing an appropriate accounting policy dealing with a particular section or event before applying the Standard of GRAP on Accounting Policies, Changes in Accounting Estimates and Errors.

Management has considered all of the above-mentioned GRAP standards issued but not effective and anticipates that the adoption of these standards will not have a significant impact on the financial position, financial performance or cash flows of the municipality.

3. PRESENTATION CURRENCY

These annual financial statements are presented in South African Rand and are rounded off to the nearest Rand.

4. GOING CONCERN ASSUMPTION

These annual financial statements have been prepared on a going concern basis.

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5. OFFSETTING

Financial assets and liabilities are offset and the net amount reported on the Statement of Financial Position when there is a legally enforceable right to set off the recognised amount, and there is an intention to settle on a net basis, or to realise the asset and settle the liability simultaneously.

6. COMPARATIVE INFORMATION AND BUDGET INFORMATION

6.1 Current year comparatives

The annual budget figures have been prepared in accordance with the GRAP standard and are consistent with the accounting policies adopted by the Council for the preparation of these financial statements. The amounts are scheduled as a separate additional financial statement, called the Statement of Comparison of Budget and Actual amounts. Explanatory comment is provided in the notes to the annual financial statements giving motivations for over- or under spending on line items where it is found to be material. The annual budget figures included in the financial statements are for the Municipality and do not include budget information relating to subsidiaries or associates. These figures are those approved by the Council at the beginning and during the year following a period of consultation with the public as part of the Integrated Development Plan. The budget is approved on an accrual basis by nature classification. The approved budget covers the period from 1 July 2018 to 30 June 2019.

In general a difference of 10% or more is considered material, although the surrounding circumstances are taken into account if it could influence the decisions or assessments of the users of the financial statements in determining whether a difference between the budgeted and actual amount is material.

6.2 Prior year comparatives

The comparative figures of one prior period is disclosed. When the presentation or classification of items in the Annual Financial Statements is amended, prior period comparative amounts are reclassified. The nature and reasons for the reclassification are disclosed.

7. HOUSING DEVELOPMENT FUND

The Housing Development Fund was established in terms of the Housing Act (Act No. 107 of 1997).

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7.1 Housing Development Fund

Sections 15(5) and 16 of the Housing Act, (Act 107 of 1997), which came into operation on 1 April 1998, required that the Municipality maintain a separate housing operating account. This legislated separate operating account is known as the Housing Development Fund.

The Housing Act also requires in terms of Section 14(4) (d) (ii) (aa), read with, inter alia, Section 16(2), that the net proceeds of any letting, sale or alienation of property, previously financed from government housing funds, be paid into a separate operating account, and be utilised by the Municipality for housing development in accordance with the National Housing Policy.

The following provisions are set for the creation and utilisation of the Housing Development Fund:

 The proceeds in this fund are utilised for housing development in accordance with the National Housing Policy, and also for housing development projects approved by the National Minister of Human Settlements.  Any contributions to or from the fund are shown as transfers in the Statement of Changes in Net Assets.  Interest earned on the investments of the fund is disclosed as interest earned in the Statement of Financial Performance.

7.2 Un-realized Housing Proceeds

In order to comply with Section 14(4) (d) (i) and (ii) of the Housing Act, (Act 107 of 1997) where all net proceeds need to be paid into the Housing Development Fund, it was necessary to create a holding account which represents the un-realized funds due by long-term housing selling schemes and sponsored loan debtors. This account is reduced when debtors are billed for their payment.

8. INTERNAL RESERVES AND REVALUATION RESERVE

8.1 Insurance Reserve

A general Insurance Reserve has been established and, subject to re-insurance where deemed necessary, it covers claims not covered by external insurance.

Insurance premiums paid to external insurers are regarded as an expense and are shown as such in the Statement of Financial Performance. The net surplus or deficit

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on the insurance operating account is transferred to or from the insurance reserve via the Statement of Changes in Net Assets.

The cash in the municipal bank or investment account, as per cash and cash equivalents in the Statement of Financial Position, is ring-fenced and can only be utilised to finance items of property, plant and equipment.

8.2 Revaluation Reserve

The surplus arising from the revaluation of land and buildings is credited to a non- distributable reserve. The revaluation surplus is realised as re-valued buildings are depreciated, through a transfer from the revaluation reserve to the accumulated surplus / (deficit). On disposal, the net revaluation surplus is transferred to the accumulated surplus / (deficit) while gains or losses on disposal, based on re-valued amounts are credited or charged to the Statement of Financial Performance.

9. PROVISIONS

Provisions are recognised when the municipality has a present or constructive obligation as a result of past events, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate of the provision can be made.

The best estimate of the expenditure required to settle the present obligation is the amount that an entity would rationally pay to settle the obligation at the reporting date or to transfer it to a third party at that time and are determined by the judgment of the management of the entity, supplemented by experience of similar transactions and, in some cases, reports from independent experts. The evidence considered includes any additional evidence provided by events after the reporting date. Uncertainties surrounding the amount to be recognised as a provision are dealt with by various means according to the circumstances, where the provision being measured involves a large population of items; the obligation is estimated by weighting all possible outcomes by their associated probabilities.

Future events that may affect the amount required to settle an obligation are reflected in the amount of a provision where there is sufficient objective evidence that they will occur. Gains from the expected disposal of assets are not taken into account in measuring a provision. Provisions are not recognised for future operating losses. The present obligation under an onerous contract is recognised and measured as a provision. An onerous contract is a contract in which the unavoidable costs of meeting the obligations under the contract exceed the economic benefits expected to be

Audited Annual Financial Statements for the year ended 30 June 2019 20

received under it. The unavoidable costs under a contract reflect the least net cost of exiting from the contract, which is the lower of the cost of fulfilling it and any compensation or penalties arising from failure to fulfil it - this unavoidable cost resulting from the contract is the amount of the provision to be recognised.

Provisions are reviewed at reporting date and the amount of a provision is the present value of the expenditure expected to be required to settle the obligation. When the effect of discounting is material, provisions are determined by discounting the expected future cash flows that reflect current market assessments of the time value of money. The impact of the periodic unwinding of the discount is recognised in the Statement of Financial Performance as a finance cost as it occurs.

9.1 Environmental rehabilitation provisions

Estimated long-term environmental provisions, comprising rehabilitation and landfill site closure, are based on the Municipality’s policy, taking into account current technological, environmental and regulatory requirements. The provision for rehabilitation is recognised as and when the environmental liability arises. To the extent that the obligations relate to the asset, they are capitalised as part of the cost of those assets. Any subsequent changes to an obligation that did not relate to the initial related asset are charged to the Statement of Financial Performance.

10. PROPERTY, PLANT AND EQUIPMENT

10.1 Initial recognition

Property, plant and equipment are tangible non-current assets (including infrastructure assets) that are held for use in the production or supply of goods or services, rental to others, or for administrative purposes, and are expected to be used during more than one year.

The cost of an item of property, plant and equipment is recognised as an asset if, and only if it is probable that future economic benefits or service potential associated with the item will flow to the municipality, and if the cost or fair value of the item can be measured reliably.

Property, plant and equipment are initially recognised at cost on its acquisition date. The cost of an item of property, plant and equipment is the purchase price and other costs attributable to bring the asset to the location and condition necessary for it to be capable of operating in the manner intended by the municipality. Trade discounts and rebates are deducted in arriving at the cost. The cost also includes the necessary costs

Audited Annual Financial Statements for the year ended 30 June 2019 21

of dismantling and removing the asset and restoring the site on which it is located.

Where an asset is acquired by the municipality for no or nominal consideration (i.e. a non-exchange transaction), the cost is deemed to be equal to the fair value of that asset on the date acquired.

The cost of an item of property, plant and equipment acquired in exchange for a non- monetary assets or monetary assets, or a combination of monetary and non-monetary assets is measured at the fair value of the asset given up, unless the fair value of the asset received is more clearly evident. If the acquired item could not be measured at its fair value, its cost is measured at the carrying amount of the asset given up.

When significant components of an item of property, plant and equipment have different useful lives, they are accounted for as separate items (major components) of property, plant and equipment.

Major spare parts and servicing equipment qualify as property, plant and equipment when the municipality expects to use them during more than one period. Similarly, if the major spare parts and servicing equipment can be used only in connection with an item of property, plant and equipment, they are accounted for as property, plant and equipment.

10.2 Subsequent measurement

Subsequent expenditure relating to property, plant and equipment is capitalised if it is probable that future economic benefits or potential service delivery associated with the subsequent expenditure will flow to the entity and the cost or fair value of the subsequent expenditure can be reliably measured. Subsequent expenditure incurred on an asset is only capitalised when it increases the capacity or future economic benefits associated with the asset. Where the municipality replaces parts of an asset, it derecognises the part of the asset being replaced and capitalises the new component.

Subsequently all property plant and equipment, excluding land and buildings, are measured at cost, less accumulated depreciation and accumulated impairment losses.

Subsequent to initial recognition, land and buildings are carried at a revalued amount based on municipal valuations, less any subsequent accumulated depreciation and subsequent accumulated impairment losses. Revaluations are performed by external independent valuers every four years to coincide with the implementation of the general valuation such that the carrying amount does not differ materially from that which would be determined using fair value at the Statement of Financial Position date.

Audited Annual Financial Statements for the year ended 30 June 2019 22

Any accumulated depreciation at the date of revaluation is eliminated against the gross carrying amount of the asset, and the net amount is restated to the revalued amount of the asset.

An increase in the carrying amount of land and buildings as a result of a revaluation is credited directly to a revaluation surplus reserve, except to the extent that it reverses a revaluation decrease of the same asset previously recognised in surplus or deficit.

A decrease in the carrying amount of an asset as a result of a revaluation is recognised in surplus or deficit, except to the extent of any credit balance existing in the revaluation surplus in respect of that asset.

Where items of property, plant and equipment have been impaired, the carrying value is adjusted by the impairment loss, which is recognised as an expense in the period that the impairment is identified except where the impairment reverses a previous revaluation.

When revalued assets are sold or retired, the amounts included in the revaluation reserve in respect of that assets, are transferred to accumulated surplus or deficit.

Compensation from third parties for items of property, plant and equipment that were impaired, lost or given up is included in surplus or deficit when the compensation becomes receivable.

10.3 Depreciation

Land is not depreciated as it is regarded as having an unlimited life. Depreciation on assets other than land is calculated using the straight line method, to allocate their cost or revalued amounts less their residual values over the estimated useful lives of the assets. The depreciation method used reflects the pattern in which the asset’s future economic benefits or service potential are expected to be consumed by the municipality. Each part of an item of property, plant and equipment with a cost that is significant in relation to the total cost of the item shall be depreciated separately. The depreciation rates are based on the following estimated useful lives.

Audited Annual Financial Statements for the year ended 30 June 2019 23

Asset class Useful lives as applied in the AR (years) Infrastructure Roads and storm water 5-100 Electricity 5-75 Water 5-100 Sewerage 5-100 Solid Waste 5-100 Buildings, structures and facilities Buildings 50 Recreational and sports facilities 5-100 Parks, gardens and cemeteries 5-100 Housing assets 50 Other assets Transport Assets 5-20 Computer and other office equipment 3-10 Furniture & fittings 5-10 Machinery and equipment 5-10

The useful lives, residual values and depreciation method are reviewed annually at the end of the financial year where there is any indication that the entity’s expectations about the residual amount and the useful life of an asset has changed since the preceding reporting date. Any adjustments arising from the annual review are applied prospectively.

Assets under construction are carried at cost. Depreciation of an asset commences when the asset is ready for its intended use. Assets held under finance leases are depreciated over their expected useful lives on the same basis as owned assets, or, where shorter, the term of the relevant lease.

10.4 De-recognition of property, plant and equipment

The carrying amount of an item of property, plant and equipment is derecognised on disposal, or when no future economic benefits or service potential are expected from its use or disposal

The gain or loss arising from derecognition of an item of property, plant and equipment is included in surplus or deficit when the item is derecognised. Gains are not classified as revenue.

Gains or losses are calculated as the difference between the carrying values of assets (Cost less accumulated depreciation and accumulated impairment losses) and the

Audited Annual Financial Statements for the year ended 30 June 2019 24

disposal proceeds is included in the Statement of Financial Performance as a gain or loss on disposal of property, plant and equipment.

11. INTANGIBLE ASSETS

Intangible assets are identifiable non–monetary assets without physical substance held for use in the production or supply of goods or services, for rental to others, or for administrative purposes are classified and recognised as intangible assets.

Intangible assets are initially recognised at cost. The cost of an intangible asset is the purchase price and other costs attributable to bring the intangible asset to the location and condition necessary for it to be capable of operating in the manner intended by the municipality, or where an intangible asset is acquired at no cost, or for a nominal cost, the cost shall be its fair value as at the date of acquisition. Trade discounts and rebates are deducted in arriving at the cost.

Intangible assets acquired separately or internally generated are reported at cost less accumulated amortisation and accumulated impairment losses.

Amortization is calculated on cost, using the straight-line method, over the useful lives of the assets, which is estimated to be between 3 to 10 years upon initial recognition. Where intangible assets are deemed to have an indefinite useful life, such intangible assets are not amortised.

Intangible assets are annually tested for impairment and the estimated useful life, residual values and amortisation method are reviewed annually at the end of the financial year. Any adjustments arising from the annual review are applied prospectively.

Intangible assets are derecognised when the asset is disposed of or when there are no further economic benefits or service potential expected from the use of the asset. The gain or loss arising on the disposal or retirement of an intangible asset is determined as the difference between the net disposals proceeds and the carrying value and is recognised in the Statement of Financial Performance.

12. INVESTMENT PROPERTIES

Investment property includes property (land or a building, or part of a building, or both land and buildings held under a finance lease) held to earn rentals and/or for capital appreciation, rather than held to meet service delivery objectives, the production or supply of goods or services, or the sale of an asset in the ordinary course of operations.

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At initial recognition, the municipality measures investment property at cost including transaction costs once it meets the definition of investment property. However, where an investment property was acquired through a non-exchange transaction (i.e. where it acquired the investment property for no or a nominal value), its cost is its fair value as at the date of acquisition.

Where the classification of an investment property is based on management's judgement, the following criteria have been applied to distinguish investment properties from owner-occupied property or property held for resale:

 All properties held to earn market-related rentals or for capital appreciation or both and that are not used for administrative purposes and that will not be sold within the next 12 months are classified as Investment Properties.  Land held for a currently undetermined future use.  A building owned (or held by under a finance lease) and leased out under one or more operating leases.  Leased properties that are held to provide a social (community) service or that are necessary for employees to perform their job functions, but which also generates rental revenue are not seen as investment properties. The rental revenue generated is incidental to the purposes for which the property is held.  A building that is vacant but is held to be leased out under one or more operating leases.  Property that is being constructed or developed for future use as investment property.

Investment property is subsequently measured using the fair value model. Investment property is carried at fair value, representing open market value determined by external valuers on reporting date. Fair value is based on active market prices, adjusted, if necessary, for any difference in the nature, location or condition of the specific asset. A gain or loss arising from a change in the fair value of investment property is included in surplus or deficit for the period in which it arises.

If the Municipality determines that the fair value of an investment property under construction is not reliably measurable but expects the fair value to be reliably measurable when construction is completed, it measures that investment property at cost until the fair value can be reliably determined or construction has been completed.

Where the Municipality has determined that the fair value of an investment property (other than investment property under construction) is not determinable on a continuing basis, the entity measures that investment property using the cost model

Audited Annual Financial Statements for the year ended 30 June 2019 26

(as per the accounting policy for property, plant and equipment).

An investment property shall be derecognised (eliminated from the statement of financial position) on disposal or when the investment property is permanently withdrawn from use and no future economic benefits or service potential are expected from its disposal. The gain or loss arising on the disposal of an investment property is determined as the difference between the sales proceeds and the carrying value and is recognised in the Statement of Financial Performance.

13. HERITAGE ASSETS

A heritage asset is defined as an asset that has a cultural, environmental, historical, natural, scientific, technological or artistic significance, and is held and preserved indefinitely for the benefit of present and future generations.

The Municipality classifies assets as heritage assets where the significance as a heritage asset can be determined. In regard to land and buildings all graded sites are classified a Heritage Assets. Furthermore land with a natural significance is not componentised but seen as a single Heritage asset due to all parts contributing together to make up its significance.

GRAP 103 requires that land and buildings that qualify as Heritage assets, but of which a significant portion of that land and buildings is held for use in the production or supply of goods or services or for administrative purposes, should be recognised as property, plant and equipment, rather than heritage assets.

13.1 Initial recognition

The cost of an item of heritage assets is recognised as an asset if, and only if it is probable that future economic benefits or service potential associated with the item will flow to the municipality, and if the cost or fair value of the item can be measured reliably.

Heritage assets are initially recognised at cost on its acquisition date or in the case of assets acquired by grant or donation, deemed cost, being the fair value of the asset on initial recognition. The cost of an item of heritage assets is the purchase price and other costs attributable to bring the asset to the location and condition necessary for it to be capable of operating in the manner intended by the municipality. Trade discounts and rebates are deducted in arriving at the cost. The cost also includes the necessary costs of dismantling and removing the asset and restoring the site on which it is located.

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Where an asset is acquired by the municipality for no or nominal consideration (i.e. a non-exchange transaction), the cost is deemed to be equal to the fair value of that asset on the date acquired.

The cost of an item of heritage assets acquired in exchange for a non-monetary assets or monetary assets, or a combination of monetary and non-monetary assets is measured at the fair value of the asset given up, unless the fair value of the asset received is more clearly evident. If the acquired item could not be measured at its fair value, its cost is measured at the carrying amount of the asset given up.

13.2 Subsequent measurement

Subsequent expenditure relating to heritage assets is capitalised if it is probable that future economic benefits or potential service delivery associated with the subsequent expenditure will flow to the entity and the cost or fair value of the subsequent expenditure can be reliably measured. Subsequent expenditure incurred on an asset is only capitalised when it increases the capacity or future economic benefits associated with the asset. Where the municipality replaces parts of an asset, it derecognises the part of the asset being replaced and capitalises the new component.

Subsequently all heritage assets (excluding Heritage assets which are land and buildings) are measured at cost less accumulated impairment losses. Heritage assets are not depreciated.

Subsequent to initial recognition, land and buildings which qualify as Heritage Assets are carried at a revalued amount based on municipal valuations less subsequent accumulated impairment losses. Revaluations are performed by external independent valuers every four years to coincide with the implementation of the general valuation such that the carrying amount does not differ materially from that which would be determined using fair value at the Statement of Financial Position date.

13.3 De-recognition of heritage assets

The carrying amount of an item of heritage assets is derecognised on disposal, or when no future economic benefits or service potential are expected from its use or disposal. The gain or loss arising from derecognition of an item of heritage assets is included in surplus or deficit when the item is derecognised.

Gains or losses are calculated as the difference between the carrying value of assets (cost less accumulated impairment losses) and the disposal proceeds is included in the Statement of Financial Performance as a gain or loss on disposal of heritage assets.

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14. INVENTORIES

Inventories consist of raw materials, work in progress, consumables and finished goods, which are valued at the lower of cost, determined on the first in first out basis, and net realisable value, except for plants which are valued at the tariffs charged. Where it is held for distribution or consumption at no charge or for a nominal amount, inventories are valued at the lower of cost and current replacement value.

Cost of inventories comprises all costs of purchase, cost of conversion, and other costs incurred in bringing the inventories to their present location and condition.

Redundant and slow moving inventories are identified and written down to their estimated net realisable values. Inventories are written down according to their age, condition and utility. Differences arising on the measurement of such inventory at the lower of cost and net realisable value are recognised in the Statement of Financial Performance in the year in which they arise. The amount of any reversal of any write- down of inventories arising from an increase in net realisable value or current replacement cost is recognised as a reduction in the amount of inventories recognised as an expense in the period in which the reversal occurs.

The carrying amount of inventories is recognised as an expense in the period that the inventory was sold, distributed, written off or consumed, unless that cost qualifies for capitalisation to the cost of another asset.

14.1 Water inventory

Water is regarded as inventory when the municipality purchases water in bulk with the intention to resell it to the consumers or to use it internally, or where the municipality has incurred purification costs on water obtained from natural resources (rain, rivers, springs, boreholes etc.). However, water in dams, that are filled by natural resources and that has not yet been treated, and is under the control of the municipality but cannot be measured reliably as there is no cost attached to the water, and it is therefore not recognised in the statement of financial position.

The basis of determining the cost of water purchased and not yet sold at statement of financial position date comprises all costs of purchase, cost of conversion and other costs incurred in bringing the inventory to its present location and condition, net of trade discounts and rebates.

Water is valued by using the weighted average method, at the lowest of purified cost and net realisable value, insofar as it is stored and controlled in reservoirs at year-end.

Audited Annual Financial Statements for the year ended 30 June 2019 29

15. IMPAIRMENT OF PROPERTY, PLANT AND EQUIPMENT, INTANGIBLE ASSETS AND HERITAGE ASSETS

The municipality classifies all assets held with the primary objective of generating a commercial return as cash-generating assets. A commercial return means that the return charged by the entity is commensurate with the risk associated with holding the asset and the asset is intended to generate positive cash inflows. All other assets are classified as non-cash-generating assets.

15.1 Impairment of cash generating assets

The municipality assesses at each reporting date whether there is any indication that an asset may be impaired. If any such indication exists, the municipality estimates the recoverable amount of the individual asset.

If there is any indication that an asset may be impaired, the recoverable amount is estimated for the individual asset. If it is not possible to estimate the recoverable amount of the individual asset, the recoverable amount of the cash-generating unit to which the asset belongs is determined.

The best evidence of fair value less cost to sell is the price in a binding sale agreement in an arm’s length transaction, adjusted for the incremental cost that would be directly attributable to the disposal of the asset.

The recoverable amount of an asset or a cash-generating unit is the higher of its fair value less costs to sell and its value in use.

Value in use of a cash-generating asset is the present value of the estimated future cash flows expected to be derived from the continuing use of an asset and from its disposal at the end of its useful life.

If the recoverable amount of an asset is less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount. That reduction is an impairment loss.

An impairment loss of assets carried at cost less any accumulated depreciation or amortisation is recognised immediately in surplus or deficit.

An impairment of assets carried at revalued amount reduces the revaluation surplus for that asset. The decrease shall be debited directly to a revaluation surplus to the extent of any credit balance existing in the revaluation surplus in respect of that asset.

Audited Annual Financial Statements for the year ended 30 June 2019 30

An impairment loss is recognised for cash-generating units if the recoverable amount of the unit is less than the carrying amount of the unit. The impairment loss is allocated to reduce the carrying amount of the assets of the unit, pro rata on the basis of the carrying amount of each asset in the unit.

A municipality assesses at each reporting date whether there is any indication that an impairment loss recognised in prior periods for assets may no longer exist or may have decreased. If any such indication exists, the recoverable amounts of those assets are estimated.

The increased carrying amount of an asset attributable to a reversal of an impairment loss does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset in prior periods.

A reversal of an impairment loss of assets carried at cost less accumulated depreciation or amortisation is recognised immediately in surplus or deficit.

15.2 Impairment of non-cash generating assets

The municipality assesses at each reporting date whether there is any indication that an asset may be impaired. If any such indication exists, the municipality estimates the recoverable service amount of the asset.

If there is any indication that an asset may be impaired, the recoverable service amount is estimated for the individual asset. If it is not possible to estimate the recoverable service amount of the individual asset, the recoverable service amount of the cash-generating unit to which the asset belongs is determined.

The recoverable service amount is the higher of a non-cash generating asset's fair value less costs to sell and its value in use. The value in use for a non-cash generating asset is the present value of the asset’s remaining service potential.

The value in use for a non-cash generating asset is the present value of the asset’s remaining service potential.

Fair value less costs to sell is the amount obtainable from the sale of an asset in an arm’s length transaction between knowledgeable and willing parties, less the costs of disposal.

If the recoverable service amount of an asset is less than its carrying amount, the carrying amount of the asset is reduced to its recoverable service amount. That

Audited Annual Financial Statements for the year ended 30 June 2019 31

reduction is an impairment loss.

An impairment loss of assets carried at cost less any accumulated depreciation or amortisation is recognised immediately in surplus or deficit. Any impairment loss of a revalued asset is treated as a revaluation decrease.

A municipality assesses at each reporting date whether there is any indication that an impairment loss recognised in prior periods for assets may no longer exist or may have decreased. If any such indication exists, the recoverable service amounts of those assets are estimated.

The increased carrying amount of an asset attributable to a reversal of an impairment loss does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset in prior periods. A reversal of an impairment loss of assets carried at cost less accumulated depreciation or amortisation is recognised immediately in surplus or deficit. Any reversal of an impairment loss of a revalued asset is treated as a revaluation increase.

16. EMPLOYEE BENEFITS

The municipality provides short term benefits, long term benefits and retirement benefits for its employees and councillors.

16.1 Short-term employee benefits

Remuneration to employees is recognised in the Statement of Financial Performance as the services are rendered, except for non-accumulating benefits which are only recognised when the specific event occurs. The costs of all short-term employee benefits such as leave pay, are recognised during the period in which the employee renders the related service.

16.2 Post-employment benefits: Defined contribution plans

A defined contribution plan is a plan under which the municipality pays fixed contributions into a separate entity. The municipality has no legal or constructive obligation to pay further contributions if the fund does not hold sufficient assets to pay all employees the benefits relating to service in the current or prior periods.

The municipality’s contributions to the defined contribution funds are established in terms of the rules governing those plans. Contributions are recognised in the

Audited Annual Financial Statements for the year ended 30 June 2019 32

Statement of Financial Performance in the period in which the service is rendered by the relevant employees.

16.3 Post-employment benefits: Defined benefit plans

A defined benefit plan is a plan that defines an amount of benefit that an employee will receive on retirement.

The defined benefit liability is the aggregate of the present value of the defined benefit obligation and unrecognised actuarial gains and losses, reduced by unrecognised past service costs. The plan is unfunded. The defined benefit obligation is calculated using the projected unit credit method, incorporating actuarial assumptions and a discount rate based on the government bond rate. Valuations of these obligations are carried out by independent qualified actuaries regularly, as may be required for fair presentation.

Actuarial gains or losses recognised immediately in the Statement of Financial Performance.

16.3.1 Post-retirement Health Care Benefits:

The municipality has an obligation to provide post-retirement health care benefits to certain of its retirees. According to the rules of the Medical Aid Funds, with which the municipality is associated, a member (who is on the current Conditions of Service), on retirement, is entitled to remain a continued member of the Medical Aid Fund, in which case the municipality is liable for a certain portion of the medical aid membership fee.

The defined benefit liability is the aggregate of the present value of the defined benefit obligation and unrecognised actuarial gains and losses, reduced by unrecognised past service costs. The plan is unfunded. The present value of the defined benefit obligation is calculated using the projected unit credit method, incorporating actuarial assumptions and a discount rate based on the government bond rate. Valuations of these obligations are carried out annually by independent qualified actuaries.

Past-service costs are recognised immediately in income, unless the changes to the pension plan are conditional on the employees remaining in service for a specified period of time (the vesting period). In this case, the past-service costs are amortised on a straight-line basis over the vesting period.

Audited Annual Financial Statements for the year ended 30 June 2019 33

16.3.2 Ex-gratia Pension Benefits:

The Municipality provides pension and retirement gratuity benefits to certain employees who were in the employment of the former Paarl and Wellington Municipalities (now incorporated into the Drakenstein Municipality) at 31 December 1994 (Paarl) and 31 March 1995 (Wellington) and still in the employment of Drakenstein Municipality at date of normal retirement, medical disability, retrenchment or death. The gratuity is calculated on the salary benefits during 1994/1995.

16.4 Long-service allowance

The municipality has an obligation to provide Long-service Allowance Benefits to all of its employees. According to the rules of the Long-service Allowance Scheme, which the municipality instituted and operates, an employee (who is on the current Conditions of Service), is entitled to a cash allowance, calculated in terms of the rules of the scheme, after 10, 15, 20, 25 and 30 years of continued service. The municipality’s liability is based on an actuarial valuation. The projected unit credit method has been used to value the liabilities. Actuarial gains and losses on the long- term incentives are accounted for through the statement of financial performance.

16.5 National- and Provincially administered defined benefit plans

The municipality contributes to various National- and Provincial-administered Defined Benefit Plans on behalf of its qualifying employees. The contributions to fund obligations for the payment of retirement benefits are charged against revenue in the year they become payable. These defined benefit funds are actuarially valued triennially on the projected unit credit method basis. Deficits are recovered through lump sum payments or increased future contributions on a proportional basis from all participating municipalities.

The municipality does not apply defined benefit accounting to the defined benefit funds to which it is a member where these funds are classified in terms of GRAP as multi-employer plans, as sufficient information is not available to apply the principles involved. As a result, GRAP 25 is applied and such funds are accounted for as defined contribution funds.

Salaried personnel are members of the Cape Joint Pension fund established in terms of the Local Authorities Pension Fund Ordinance, 1969 (Ordinance 23 of 1969), and the provisions of the Pension Fund Act, 1956 (Act 24 of 1956) or the SAMWU National Provident Fund.

Audited Annual Financial Statements for the year ended 30 June 2019 34

16.6 Leave pay

Liabilities for annual leave are recognised as they accrue to employees. The liability is based on the total accrued leave days at year end and is shown as an accrual in the Statement of Financial Position.

16.7 Provision for bonus

The municipality recognises the expected cost of bonuses as a provision only when the municipality has a present legal or constructive obligation to make such payment and a reliable estimate can be made at reporting date.

17. LEASES

17.1 Lease classification

Leases are classified as finance leases where substantially all the risks and rewards associated with ownership of an asset are transferred to the municipality.

Leases of property, plant and equipment, in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases.

17.2 The Municipality as lessee

Property, plant and equipment subject to finance lease agreements are capitalised at their cash cost equivalent. Corresponding liabilities are included in the Statement of Financial Position as Finance Lease Obligations. The cost of the item of property, plant and equipment is depreciated at appropriate rates on the straight-line basis over its estimated useful life. Lease payments are allocated between the lease finance cost and the capital repayment using the effective interest rate method. Lease finance costs are expensed when incurred.

Operating leases are those leases that do not fall within the scope of the above definition. Operating lease rentals are recognised on the straight-line basis over the term of the relevant lease.

In the event that lease incentives are received to enter into operating leases, such incentives are recognised as a liability. The aggregate benefit of incentives is recognised as a reduction of rental expense on a straight-line basis, except where another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed.

Audited Annual Financial Statements for the year ended 30 June 2019 35

17.3 The Municipality as lessor

Amounts due from lessees under finance leases or instalment sale agreements are recorded as receivables at the amount of the Municipality’s net investment in the leases. Finance lease or instalment sale income is allocated to accounting periods so as to reflect a constant periodic rate of return on the Municipality’s net investment outstanding in respect of the leases or instalment sale agreements.

Operating lease rental income is recognised on a straight-line basis over the term of the relevant lease.

18. BORROWINGS

Interest-bearing external loans and bank overdrafts are recorded net of direct issue costs. Finance charges, including premiums payable, are accounted for on an accrual basis. Borrowings are initially recognised at fair value, net of transaction costs. Subsequently, they are measured at amortised cost using the effective interest rate method.

Borrowing costs are recognised as an expense in the Statement of Financial Performance in the period incurred.

19. FINANCIAL INSTRUMENTS

The municipality has various types of financial instruments and these can be broadly categorised as either Financial Assets or Financial Liabilities.

A financial instrument is recognised if the municipality becomes a party to the contractual provisions of the instrument.

19.1 Classification of financial instruments

19.1.1 Financial Assets

A financial asset is any asset that is a cash or contractual right to receive cash. In accordance with GRAP 104 the Financial Assets of the municipality are classified as follows into the three categories allowed by this standard:

Financial asset at amortised cost being a non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in

Audited Annual Financial Statements for the year ended 30 June 2019 36

current assets, except for maturities greater than 12 months, which are classified as non-current assets.

Financial assets measured at fair value being financial assets that meet either of the following conditions:

(a) Derivatives; (b) Combined instruments that are designated at fair value; (c) Instruments held for trading; (d) Non-derivative financial assets or financial liabilities with fixed or determinable payments that are designated at fair value at initial recognition; or (e) Financial instruments that do not meet the definition of financial instruments at amortised cost or financial instruments at cost.

Financial assets measured at cost being investments in residual interests that do not have a quoted market price in an active market, and whose fair value cannot be reliably measured.

The municipality has the following types of financial assets as reflected on the face of the Statement of Financial Position or in the notes thereto:

Type of Financial Asset Classification in terms of GRAP 104 Finance Lease Receivables Financial assets at amortised cost Long-term Receivables Financial assets at amortised cost Current portion of Long-term Receivables Financial assets at amortised cost Consumer Debtors Financial assets at amortised cost Other Debtors Financial assets at amortised cost Short-term Investment Deposits – Call Financial assets at amortised cost Bank Balances and Cash Financial assets at amortised cost Investments in stock – ESKOM Financial assets at fair value

Cash includes cash on hand (including petty cash) and cash with banks (including call deposits). Cash equivalents are short-term highly liquid investments, readily convertible into known amounts of cash that are held with registered banking institutions with maturities of three months or less and are subject to an insignificant risk of change in value. For the purposes of the cash flow statement, cash and cash equivalents comprise cash on hand, deposits held on call with banks, net of bank overdrafts. The municipality categorises cash and cash equivalents as financial assets at amortised cost.

Audited Annual Financial Statements for the year ended 30 June 2019 37

19.1.2 Financial Liabilities

A financial liability is a contractual obligation to deliver cash or another financial asset to another entity.

The following main categories of Financial Liabilities and the classification determining how they are measured exist:

(i) Financial liabilities measured at fair value; or (ii) Financial liabilities measured at amortised cost

The municipality has the following types of financial liabilities as reflected on the face of the Statement of Financial Position or in the notes thereto:

Type of Financial Liabilities Classification in terms of GRAP 104 Long term Liabilities Financial liability at amortised cost Other Creditors Financial liability at amortised cost Bank overdraft Financial liability at amortised cost Short-term Loans Financial liability at amortised cost Current portion of Long-Term Liabilities Financial liability at amortised cost

Financial liabilities that are measured at fair value that are essentially held for trading (i.e. purchased with the intention to sell or repurchase in the short term; derivatives other than hedging instruments or are part of a portfolio of financial instruments where there is recent actual evidence of short-term profiteering or are derivatives)

Any other financial liabilities should be classified as financial liabilities at amortised cost.

Bank overdrafts are recorded based on the facility utilised. Finance charges on bank overdrafts are expensed as incurred.

19.2 Initial and subsequent measurement

19.2.1 Financial assets:

Financial asset at amortised cost are initially measured at fair value plus transaction costs that are directly attributable to the acquisition or issue of the financial asset. Subsequently, these assets are measured at amortised cost using the Effective Interest Method less any impairment, with interest recognised on an effective yield basis.

Audited Annual Financial Statements for the year ended 30 June 2019 38

Trade and other receivables (excluding Value Added Taxation, prepayments and operating lease receivables), loans to Municipality entities and loans that have fixed and determinable payments that are not quoted in an active market are classified as financial asset at amortised cost.

Financial Assets measured at fair value are initially measured at fair value plus directly attributable transaction costs. They are subsequently measured at fair value with unrealised gains or losses recognised directly in equity until the investment is derecognised, at which time the cumulative gain or loss recorded in equity is recognised in the statement of financial performance, or determined to be impaired, at which time the cumulative loss recorded in equity is recognised in the statement of financial performance.

19.2.2 Financial liabilities:

Financial liabilities measured at fair value are stated at fair value, with any resulted gain or loss recognised in the Statement of Financial Performance.

Any other financial liabilities classified at amortised cost (All payables, loans and borrowings are classified as other liabilities) and are initially measured at fair value, net of transaction costs. Trade and other payables, interest bearing debt including finance lease liabilities, non-interest bearing debt and bank borrowings are subsequently measured at amortised cost using the effective interest rate method. Interest expense is recognised in the Statement of Financial Performance by applying the effective interest rate.

Bank borrowings, consisting of interest-bearing short-term bank loans, repayable on demand and overdrafts are recorded at the proceeds received. Finance costs are accounted for using the accrual basis and are added to the carrying amount of the bank borrowing to the extent that they are not settled in the period that they arise.

Prepayments are carried at cost less any accumulated impairment losses.

19.3 Impairment of financial assets

Financial assets, other than those measured at fair value, are assessed for indicators of impairment at the end of each reporting period. Financial assets are impaired where there is objective evidence of impairment of Financial Assets (such as the probability of insolvency or significant financial difficulties of the debtor). If there is such evidence

Audited Annual Financial Statements for the year ended 30 June 2019 39

the recoverable amount is estimated and an impairment loss is recognised in accordance with GRAP 104.

Trade receivables encompass long term debtors, consumer debtors and other debtors. A provision for impairment of trade receivables is established when there is objective evidence that the municipality will not be able to collect all amounts due according to the original terms of receivables. The amount of the provision is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the effective interest rate.

According to GRAP 104, the assessment for impairment needs to be made for each individual financial asset separately or for groups of financial assets with similar credit risks. The following methodology was followed to make a provision for bad debts for the year under review:

19.3.1 Consumer debtors

Consumer debtors are assessed individually thereafter collectively, considering factors such as payment histories and ratios, qualitative factors e.g. correspondence from attorneys, disputes about certain accounts, etc.

19.3.2 Other debtors

Other Debtors are reviewed individually considering payment histories and disputes about certain amounts. Provision for impairment is made accordingly.

19.3.3 Long term debtors

 Housing Loans

The loans in this group are assessed by reviewing their payment histories and ratios. Provision for impairment is made accordingly.

 Other Long Term Debtors

No provision for impairment is made for Other Long term Debtors, because it is envisaged that these debts will be fully recovered.

Other financial assets at amortised cost are assessed individually for impairment.

Audited Annual Financial Statements for the year ended 30 June 2019 40

The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of trade receivables, where the carrying amount is reduced through the use of an allowance account. When a trade receivable is considered uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against the allowance account. Changes in the carrying amount of the allowance account are recognised in the Statement of Financial Performance.

If in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed through the Statement of Financial Performance to the extent that the carrying amount of the investment at the date the impairment is reversed does not exceed what the amortised cost would have been had the impairment not been recognised.

19.4 De-recognition of financial assets

The municipality derecognises Financial Assets only when the contractual rights to the cash flows from the asset expires or it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another entity, except when Council approves the write-off of Financial Assets due to non-recoverability.

If the municipality neither transfers nor retains substantially all the risks and rewards of ownership and continues to control the transferred asset, the municipality recognises its retained interest in the asset and an associated liability for amounts it may have to pay. If the municipality retains substantially all the risks and rewards of ownership of a transferred financial asset, the municipality continues to recognise the financial asset and also recognises a collateralised borrowing for the proceeds received.

19.5 De-recognition of financial liabilities

The municipality derecognises Financial Liabilities when, and only when, the municipality's obligations are discharged, cancelled or they expire.

20. REVENUE RECOGNITION

Revenue, excluding value-added taxation where applicable, is derived from a variety of sources which include rates levied, grants from other tiers of government and revenue from trading activities and other services provided.

Audited Annual Financial Statements for the year ended 30 June 2019 41

The municipality recognises revenue when the amount of revenue can be reliably measured, it is probable that future economic benefits will flow to the municipality and when specific criteria have been met for each of the municipalities’ activities as described below. The amount of revenue is not considered to be reliably measurable until all contingencies relating to the sale have been resolved. The municipality bases its estimates on historical results, taking into consideration the type of customer, the type of transaction and the specifics of each arrangement. Furthermore services rendered are recognised by reference to the stage of completion of the transaction at the reporting date.

Revenue is measured at the fair value of the consideration received or receivable. Revenue is reduced for estimated customer returns, stock rotation, price protection, rebates and other similar allowances.

Revenue from exchange transactions refers to revenue that accrued to the municipality directly in return for services rendered / goods sold, the value of which approximates the consideration received or receivable.

Revenue from non-exchange transactions refers to transactions where the municipality received revenue from another entity without directly giving approximately equal value in exchange. Revenue from non-exchange transactions is generally recognised to the extent that the related receipt or receivable qualifies for recognition as an asset and there is no liability to repay the amount.

20.1 Revenue from exchange transactions

20.1.1 Service charges

Service charges relating to electricity and water are based on consumption. Meters are read on a monthly basis and are recognised as revenue when invoiced. Provisional estimates of consumption, based on the consumption history, are made monthly when meter readings have not been performed. The provisional estimates of consumption are recognised as revenue when invoiced, except at year-end when estimates of consumption up to year-end are recorded as revenue without it being invoiced. Adjustments to provisional estimates of consumption are made in the invoicing period in which meters have been read. These adjustments are recognised as revenue in the invoicing period. In respect of estimates of consumption between the last reading date and the reporting date, an accrual is made based on the average monthly consumption of consumers.

Audited Annual Financial Statements for the year ended 30 June 2019 42

Service charges relating to refuse removal are recognised on a monthly basis in arrears by applying the approved tariff to each property that has improvements. Tariffs are determined per category of property usage, and are levied monthly based on the number of refuse containers on each property, regardless of whether or not all containers are emptied during the month.

Service charges from sewerage and sanitation are based on the type of service and the number of sewer connections on all developed property, using the tariffs approved by Council and are levied monthly.

In circumstances where services cannot readily be measured and quantified, a flat rate service charge is levied monthly on such properties.

20.1.2 Pre-paid electricity

Revenue from the sale of electricity pre-paid meter cards are recognised at the point of sale. Revenue from the sale of electricity prepaid meter cards are recognised based on an estimate of the prepaid electricity consumed as at the reporting date.

20.1.3 Interest earned and rentals received

Interest and rentals are recognised on a time proportion basis that takes into account the effective yield on the investment. Interest may be transferred from the Accumulated Surplus to the Housing Development Fund or the Insurance Reserve.

20.1.4 Dividends

Dividends are recognised on the date that the municipality becomes entitled to receive the dividend in accordance with the substance of the relevant agreement, where applicable.

20.1.5 Tariff charges

Revenue arising from the application of the approved tariff of charges is recognised when the relevant service is rendered by applying the relevant authorised tariff. This includes the issuing of licences and permits.

Audited Annual Financial Statements for the year ended 30 June 2019 43

20.1.6 Income from agency services

Income for agency services is recognised on a monthly basis once the income collected on behalf of agents has been quantified. The income recognised is in terms of the agency agreement.

20.1.7 Housing rental and instalments

Finance income from the sale of housing by way of instalment sale agreements or finance leases is recognised on a time proportion basis.

20.1.8 Sale of goods

Revenue from the sale of goods is recognised when all the following conditions have been satisfied:

 The municipality has transferred to the buyer the significant risks and rewards of ownership of the goods.  The municipality retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold.  The amount of revenue can be measured reliably.  It is probable that the economic benefits or service potential associated with the transaction will flow to the municipality.  The costs incurred or to be incurred in respect of the transaction can be measured reliably.

20.2 Revenue from non-exchange transactions

20.2.1 Rates and taxes

Revenue from property rates is recognised when the legal entitlement to this revenue arises. Collection charges are recognised when such amounts are legally enforceable. Penalty interest on unpaid rates is recognised on a time proportion basis with reference to the principal amount receivable and effective interest rate applicable. A composite rating system charging different rate tariffs is employed. Rebates are granted to certain categories of ratepayers and are deducted from revenue.

Audited Annual Financial Statements for the year ended 30 June 2019 44

20.2.2 Fines

Fines constitute both spot fines and camera fines. Fines are recognised when the receivable meets the definition of an asset and satisfies the criteria for recognition as an asset. It is measured at the best estimate, based on past experience, of the amount of revenue the Municipality is entitled to collect.

Subsequent to initial recognition and measurement, the municipality assess the collectability of the revenue and recognises a separate impairment loss where appropriate.

20.2.3 Donations and contributions

Donations and funding are recognised as revenue to the extent that the municipality has complied with any of the criteria, conditions or obligations embodied in the agreement. Where the agreement contains a stipulation to return the asset, other future economic benefits or service potential, in the event of non-compliance to these stipulations and would be enforced by the transferor, a liability is recognised to the extent that the criteria, conditions or obligations have not been met.

Where such requirements are not enforceable, or where past experience has indicated that the transferor has never enforced the requirement to return the transferred asset, other future economic benefits or service potential when breaches have occurred, the stipulation will be considered a restriction and is recognised as revenue.

Revenue from public contributions is recognised when all conditions associated with the contribution have been met or where the contribution is to finance property, plant and equipment, when such items of property, plant and equipment are brought into use.

Assets acquired in non-exchange transactions are measured at fair value in accordance with the Standards of GRAP.

20.2.4 Government grants and receipts

 Unconditional grants

Equitable share allocations are recognised in revenue at the start of the financial year if no time-based restrictions exist.

Audited Annual Financial Statements for the year ended 30 June 2019 45

 Conditional grants and receipts

Conditional grants, donations and funding are recognised as revenue to the extent that the municipality has complied with any of the criteria, conditions or obligations embodied in the agreement. Where the agreement contains a stipulation to return the asset, other future economic benefits or service potential, in the event of non-compliance to these stipulations and would be enforced by the transferor, a liability is recognised to the extent that the criteria, conditions or obligations have not been met. Where such requirements are not enforceable, or where past experience has indicated that the transferor has never enforced the requirement to return the transferred asset, other future economic benefits or service potential when breaches have occurred, the stipulation will be considered a restriction and is recognised as revenue.

Government grants that are receivable as compensation for expenses or losses already incurred or for the purpose of giving immediate financial support to the municipality with no future related costs are recognised in the Statement of Financial Performance in the period in which they become receivable.

Revenue is recognised when all conditions associated with the contribution have been met or where the contribution is to finance property, plant and equipment, when such items of property, plant and equipment are brought into use.

 Interest earned on unspent grants and receipts

Interest earned on unspent grants and receipts is treated in accordance with grant conditions. If it is payable to the funder it is recorded as part of the creditor and if it is the municipality’s interest it is recognised as interest earned in the Statement of Financial Performance in accordance with GRAP 9.

20.2.5 Revenue from recovery of unauthorised, irregular, fruitless and wasteful expenditure

Revenue from the recovery of unauthorised, irregular, fruitless and wasteful expenditure is based on legislated procedures, including those set out in the Municipal Finance Management Act (Act No.56 of 2003) and is recognised when the recovery thereof from the responsible councillors or officials is virtually certain. Such revenue is based on legislated procedures.

Audited Annual Financial Statements for the year ended 30 June 2019 46

20.2.6 Services received in kind

Services in kind are recognised at its fair value when it is significant to the operations and/or service delivery objectives and when it is probable that the future economic benefits or service potential will flow to the entity and the fair value of the assets can be measured reliably. If the services in-kind are not significant to the operations and/or service delivery objectives and/or do not satisfy the criteria for recognition, only the nature and type of services in-kind received during the reporting period is disclosed.

20.2.7 Revenue recognition of unclaimed deposits

Unclaimed deposits older than three (3) years are recognised as revenue.

21. HOUSING ARRANGEMENTS

The ASB issued the guideline on Accounting for Arrangements Undertaken in terms of the National Housing Programme during the 2017/2018 financial year. Although not yet effective and not been early adopted by the municipality, certain principles contained within the guide necessitated the correction of certain previously accepted accounting principles applied in prior years, related to BNG housing (Top structures).

The municipality has subsequently used the principles of GRAP 109 - Accounting by Principals and Agents and GRAP 11, Construction contracts to formulate its accounting policy for housing arrangements.

Where the Municipality acts as a project manager in a housing arrangement, it is regarded as an agent in terms of the principles of GRAP 109 - Accounting by Principals and Agents.

Where the municipality is regarded as an agent, costs related to the construction of top structures and the related recovery thereof (revenue) is not be recognised in the statement of financial performance of the municipality.

Where the Municipality is identified as a project developer, the construction of the houses is performed by the municipality or by the appointment of a sub-contractor to undertake the construction on the municipality’s behalf. The municipality will apply the principles in the GRAP 11, Construction Contracts to account for these construction activities.

Where the municipality is regarded as the project developer and if the outcome of the

Audited Annual Financial Statements for the year ended 30 June 2019 47

construction contract can be estimated reliably, then contract revenue is recognised in profit or loss in proportion to the stage of completion of the contract. The stage of completion is assessed with reference to surveys of work performed. Otherwise, contract revenue is recognised only to the extent of contract costs incurred that are likely to be recoverable. Contract revenue will be in the form of a grant from the Western Cape Department of Human settlements and presented and disclosed under transfers and subsidies in the Statement of Financial Performance.

22. VALUE ADDED TAX

The Municipality is registered with SARS for VAT on the payments basis, in accordance with Section 15(2)(a) of the Value-Added Tax Act No 89 of 1991.

23. GRANTS-IN-AID

The municipality transfers money to individuals, organizations and other sectors of government from time to time. When making these transfers, the municipality does not:-

 Receive any goods or services directly in return, as would be expected in a purchase or sale transaction;  Expect to be repaid in future; or  Expect a financial return, as would be expected from an investment.

These transfers are recognised in the financial statements as expenses in the period that the events giving rise to the transfer occurred.

24. UNAUTHORISED EXPENDITURE

Section 1 of the Municipal Finance Management Act (MFMA), No 56 of 2003, defines ‘‘unauthorised expenditure’’ as follows - (a) Overspending of the total amount appropriated in the municipality’s approved budget; (b) Overspending of the total amount appropriated for a vote in the approved budget; (c) Expenditure from a vote unrelated to the department or functional area covered by the vote; (d) Expenditure of money appropriated for a specific purpose, otherwise than for that specific purpose or (e) Spending of an allocation referred to in paragraph (b), (c) or (d) of the definition of ‘‘allocation’’ otherwise than in accordance with any conditions of the

Audited Annual Financial Statements for the year ended 30 June 2019 48

allocation; or (f) a grant by the municipality otherwise than in accordance with this Act;

Section 1 of the MFMA also defines a “vote” as: a) One of the main segments into which a budget of a municipality is divided for the appropriation of money for the different departments or functional areas of the municipality; and b) Which specifies the total amount that is appropriated for the purposes of the department or functional area concerned.

The Municipality uses the Municipal Standard Chart of Accounts (mSCOA) Functions and Sub-functions, previously the Government Finance Statistics (GFS) functions, as well as departments as the main groupings of segments of the Municipality’s budget segments within the Municipality are grouped per department to facilitate greater accountability and budget implementation by the respective Executive Directors as well as per mSCOA classification to facilitate comparisons on a higher level.

All expenditure relating to unauthorised expenditure is recognised as an expense in the statement of financial performance in the year that the expenditure was incurred. The expenditure is classified in accordance with the nature of the expense, and where recovered, it is subsequently accounted for as revenue in the statement of financial performance. If the expenditure is not condoned by the Council it is treated as an asset until it is recovered or written off as irrecoverable.

25. IRREGULAR EXPENDITURE

Irregular expenditure is expenditure that is contrary to the Municipal Finance Management Act (Act No 56 of 2003), the Municipal Systems Act (Act No 32 of 2000), and the Public Office Bearers Act (Act No 20 of 1998) or is in contravention of the Municipality’s supply chain management policies.

26. FRUITLESS AND WASTEFUL EXPENDITURE

Fruitless and wasteful expenditure is expenditure that was made in vain and would have been avoided had reasonable care been exercised. All expenditure relating to fruitless and wasteful expenditure is recognised as an expense in the statement of financial performance in the year that the expenditure was incurred. The expenditure is classified in accordance with the nature of the expense, and where recovered, it is subsequently accounted for as revenue in the statement of financial performance. If the expenditure is not condoned by the Council it is treated as an asset until it is recovered or written off as irrecoverable.

Audited Annual Financial Statements for the year ended 30 June 2019 49

27. FOREIGN CURRENCIES

Transactions in foreign currencies are translated to the functional currency of the entity at exchange rates at the dates of the transactions.

Monetary assets and liabilities denominated in foreign currencies at the reporting date are retranslated to the functional currency at the exchange rate at that date. The foreign currency gain or loss on monetary items is the difference between amortised cost and fair value in the functional currency at the beginning of the period, adjusted for effective interest and payments during the period, and the amortised cost in foreign currency translated at the exchange rate at the end of the reporting period.

Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value are retranslated to the functional currency at the exchange rate at the date that the fair value was determined. Foreign currency differences arising on retranslation are recognised in surplus or deficit.

Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of the transaction.

Cash flows arising from transactions in a foreign currency are recorded in Rand's by applying, to the foreign currency amount, the exchange rate between the Rand and the foreign currency at the date of the cash flow.

28. CHANGES IN ACCOUNTING POLICIES, ESTIMATES AND ERRORS

Changes in accounting policies that are affected by management have been applied retrospectively in accordance with GRAP 3 requirements, except to the extent that it is impracticable to determine the period-specific effects or the cumulative effect of the change in policy. In such cases the municipality shall restate the opening balances of assets, liabilities and net assets for the earliest period for which retrospective restatement is practicable.

Changes in accounting estimates are applied prospectively in accordance with GRAP 3 requirements.

Correction of errors is applied retrospectively in the period in which the error has occurred in accordance with GRAP 3 requirements, except to the extent that it is impracticable to determine the period-specific effects or the cumulative effect of the error. In such cases the municipality shall restate the opening balances of assets,

Audited Annual Financial Statements for the year ended 30 June 2019 50

liabilities and net assets for the earliest period for which retrospective restatement is practicable.

Details of changes in accounting policies, changes in estimates and correction of errors are disclosed in the notes to the annual financial statements where applicable.

29. RELATED PARTIES

Individuals as well as their close family members, and/or entities are related parties if one party has the ability, directly or indirectly, to control or jointly control the other party or exercise significant influence over the other party in making financial and/or operating decisions. Management is regarded as a related party and comprises the councillors, Executive Mayor, Mayoral Committee members, Accounting Officer, executive directors and all other managers reporting directly to the Accounting Officer or as designated by the Accounting Officer.

30. EVENTS AFTER THE REPORTING DATE

Events after the reporting date that are classified as adjusting events have been accounted for in the Annual Financial Statements. The events after the reporting date that are classified as non-adjusting events after the reporting date have been disclosed in the notes to the Annual Financial Statements.

31. CONTINGENT ASSETS AND CONTINGENT LIABILITIES

Contingent liabilities represent a possible obligation that arises from past events and whose existence will be confirmed only by an occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the entity.

A contingent liability can also arise as a result of a present obligation that arises from past events but which is not recognised as a liability either because it is not probable that an outflow of resources embodying economic benefits will be required to settle the obligation or the amount of the obligation cannot be measured with sufficient reliability.

Contingent assets represent possible assets that arise from past events and whose existence will be confirmed only by an occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the entity.

Contingent assets and contingent liabilities are not recognised. Contingencies are disclosed in the notes to the annual financial statements.

Audited Annual Financial Statements for the year ended 30 June 2019 51

DRAKENSTEIN MUNICIPALITY NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019

1. KEY JUDGEMENTS AND SOURCES OF ESTIMATION UNCERTAINTY

In the application of the municipality's accounting policies, which are described above, management is required to make judgements, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the disclosure of contingent liabilities, at the end of the reporting period. The estimates and associated assumptions are based on historical experience and other factors that are considered to be reasonable under the circumstances, the results of which form the basis of making the judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.

These estimates and underlying assumptions are reviewed on an on-going basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods.

Judgements

The following are the critical judgements, apart from those involving estimations, that the management have made in the process of applying the municipality’s Accounting Policies and that have the most significant effect on the amounts recognised in Annual Financial Statements:

 Materiality Materiality is judged by reference to the size and nature of the item. The deciding factor is whether the omission or misstatement could, individually or collectively, influence the decisions that users make on the basis of these financial statements.

In preparation of the annual financial statements materiality has been considered in: a) Deciding what to report in the financial statements and how to present it. b) Assessing the effect of omissions, misstatements and errors on the financial statements.

In assessing whether an item, transaction or event is material, specific thresholds for specific items, transactions and events, or aggregations thereof has been developed. These thresholds are used to make decisions about the reporting of information (i.e. how to recognise, measure, present and disclose items,

Audited Annual Financial Statements for the year ended 30 June 2019 52

transactions and events), and used as a margin of error or framework within which to assess misstatements and errors. Based on professional judgement the quantitative value of materiality for the 2018/19 financial year is set at R11.5 million.

The municipality has also considered whether certain transactions or balances may be qualitatively material based on the inherent characteristics thereof, even though the transaction or balance is quantitatively immaterial, if: a) The item, transaction or event relates to legal or regulatory requirements. b) Related party transactions. c) The regularity or frequency with which an item, transaction or event occurs. d) The item, transaction or event results in the reversal of a trend. e) The item, transaction or event is likely to result in a change in accounting policy. f) The commencement of a new function, or the reduction or cessation of an existing function. g) The degree of estimation or judgement that is needed to determine the value of an item, transaction or event. h) An item, transaction or event that affects the going concern assumption of the municipality.

 Lease classification – Municipality as lessor The Municipality has entered into commercial property leases on its investment property portfolio. The Municipality has determined that it retains all the significant risks and rewards of ownership of these properties, and so accounts for them as operating leases.

 Lease classification – Municipality as lessee The Municipality has entered into a number of leases for office equipment. In determining whether a lease agreement is a finance lease or an operating lease requires judgement as to whether the agreement transfers substantially all the risks and rewards of ownership to the Municipality.

Judgement is required on various aspects that include, but are not limited to, the fair value of the leased asset, the economic life of the leased asset, whether or not to include renewal options in the lease term, and determining an appropriate discount rate to calculate the present value of the minimum lease payments. The Municipality has exercised its judgement on the appropriate classification of equipment leases, and has determined a number of lease arrangements are finance leases.

Audited Annual Financial Statements for the year ended 30 June 2019 53

 Classification of Property as held for strategic purposes. The Municipality classifies vacant land that is earmarked for future development in terms of the Municipality’s Spatial Development Framework, as Property, plant and Equipment, rather than Investment Property.

 Criteria for the classification of properties as Investment property rather than Property, plant and equipment, when classification is difficult are as follows: All properties held to earn market-related rentals or for capital appreciation or both and that are not for administrative purposes and that will not be sold in the ordinary course of operations are classified as Investment Properties.

 Land held for currently undetermined future use. Leases properties that are held to provide a social (community) service or that are necessary for employees to perform their job functions, but which also generates rental revenue are not seen as Investment Properties. The rental revenue generated is incidental to the purposes for which the property is held.

 Determination of Repairs and Maintenance costs Repairs and Maintenance is based on Management's own judgement of costs incurred in cost centres responsible for the maintenance and repair of Municipal owned assets. This includes internal charges (inter departmental charges) such as internal transport costs, charged out to the different departments.

Estimates and assumptions The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are described below.

 Pension and other post-employment benefits The cost of defined benefit pension plans and other employment medical benefits is determined using actuarial valuations. The actuarial valuation involves making assumptions about discount rates, expected rates of return on assets, future salary increases, mortality rates and future pension increases. Due to the long-term nature of these plans, such estimates are subject to significant uncertainty.

 Classification of financial assets and liabilities The classification of financial assets and liabilities, into categories, is based on judgement by management. The Accounting Policy on Financial Instruments describes the factors and criteria considered by the management of the municipality in the classification of financial assets and liabilities.

Audited Annual Financial Statements for the year ended 30 June 2019 54

In making the above-mentioned judgement, management considered the definition and recognition criteria for the classification of financial instruments as set out in GRAP 104: Financial Instruments.

 Impairment of financial assets The Accounting Policy on Financial Instruments describes the process followed to determine the value by which financial assets should be impaired. In making the estimation of the impairment, the management of the municipality considers the detailed criteria of impairment of financial assets as set out in GRAP 104: Financial Instruments and used its judgement to select a variety of methods and make assumptions that are mainly based on market conditions existing at the end of the reporting period. The management of the municipality is satisfied that the impairment of financial assets recorded during the year is appropriate.

The calculation in respect of the impairment of service debtors (receivables from exchange and non-exchange transactions) is based on an assessment of the extent to which debtors have defaulted on payments already due, and an assessment of their ability to make payments based on their creditworthiness. This was performed per service-identifiable categories across all classes of debtors.

The calculation in respect of the impairment of fine receivables (receivables from non-exchange transactions) is based on an assessment of the past payment history of fines per category.

 Valuation of Financial Assets at Fair Value Where the fair value of financial assets and financial liabilities recorded in the statement of financial position cannot be derived from active markets, their fair value is determined using valuation techniques including the discounted cash flow model. The inputs to these models are taken from observable markets where possible, but where this is not feasible, judgment is required in establishing fair values. Judgment includes the consideration of inputs such as liquidity risk, credit risk and volatility. Changes in assumptions about these factors could affect the reported fair value of financial instruments.

 Review of useful lives of property, plant and equipment and intangible assets The useful lives of assets are based on management’s estimation. Management considers whether there is any indication that expectations about the residual value and the useful life of an asset have changed since the preceding reporting date. These include changes in the composition, condition and nature of the asset, its susceptibility and adaptability to changes in technology and processes, the nature of the processes and environment in which the asset is deployed,

Audited Annual Financial Statements for the year ended 30 June 2019 55

availability of funding to replace the asset and changes in the market in relation to the asset, as well as planned repairs and maintenance including refurbishments.

 Valuation of Land and buildings and fair value estimations of Investment Property Land and buildings were valued and the fair value of Investment property determined, by reference to market-based evidence, using comparable prices adjusted for specific market factors such as nature, location and condition of the property.

 Impairment of property plant and equipment, intangible assets, heritage assets and inventory The Accounting Policies on Impairment of Cash and Non-cash generating assets as well as Inventory describes the conditions under which non-financial assets are tested for potential impairment losses by the management of the municipality. Significant estimates and judgements are made relating to the impairment of Property, Plant and Equipment, Intangible Assets and Heritage Assets and the write down of Inventories to the lowest of Cost and Net Realisable Values (NRV).

In making the above-mentioned estimates and judgement, management considers the subsequent measurement criteria and indicators of potential impairment losses as set out in GRAP 21: Impairment of Cash generating Assets and GRAP 26: Impairment of non-Cash generating Assets.

 Provisions and contingent liabilities Management judgement is required when recognising and measuring provisions, and when measuring contingent liabilities. Provisions are measured at the management's best estimate of the expenditure required to settle the obligation at the reporting date, and are discounted to present value where the effect is material.

Assumptions were used in determining the provision for rehabilitation of landfill sites. Provision is made for the estimated cost to be incurred on the long-term environmental obligations, comprising expenditure on pollution control and closure over the estimated life of the landfill. The provision is based on the advice and judgment of qualified engineers. The estimates are discounted at a pre-tax discount rate that reflect current market assessments of the time value of money. The increase in the rehabilitation provision due to passage of time is recognised as finance cost in the statement of financial performance.

Audited Annual Financial Statements for the year ended 30 June 2019 56

 Revenue recognition The Accounting Policies on Revenue from Exchange Transactions and Revenue from Non-exchange Transactions describes the conditions under which revenue will be recorded by the management of the municipality. In making their judgement, the management considered the detailed criteria for the recognition of revenue as set out in GRAP 9: Revenue from Exchange Transactions and GRAP 23: Revenue from Non-exchange Transactions.

In particular, in regard to revenue form exchange revenue - when goods are sold, whether the municipality had transferred to the buyer the significant risks and rewards of ownership of the goods; and, when services is rendered, whether the service has been rendered.

Also of importance is the estimation process involved in initially measuring revenue at the fair value thereof. In regard to revenue from non-exchange transactions - significant estimations were made to the initial recognition and measurement of revenue on fines, on the estimated reductions on initial recognition and measurement. Based on past experience, of the amount of revenue the Municipality is entitled to collect was calculated as 97.1% of the value of the fines issued, whereas it was estimated that 82.1% of the value of the fines issued were impaired. The management of the municipality is satisfied that recognition of the revenue in the current year is appropriate.

 Budget Information Management assumes deviations between budget and actual amounts to be material when a deviation of more than 10% exists. All material differences are explained in the notes to the annual financial statements.

Audited Annual Financial Statements for the year ended 30 June 2019 57

DRAKENSTEIN MUNICIPALITY NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 Restated 2019 2018 R R

2. HOUSING DEVELOPMENT FUND

Realised Housing Proceeds Balance at beginning of the year 18,562,751 21,636,414 Plus : Interest & Redemption & Other on Housing Schemes 224,981 315,302 Plus : (Net Loss) / Surplus on letting schemes (2,132,826) (2,871,236) Less : Housing Subsidies Expenditure (897,449) (517,729) Balance at the end of the year 15,757,456 18,562,751

Unrealised Housing Proceeds Balance at beginning of the year 1,964,733 2,465,845 Long term Housing Loans (933,993) (501,112) Balance at the end of the year 1,030,740 1,964,733 TOTAL 16,788,195 20,527,484

3. RESERVES AND FUNDS

Re-valuation Reserve 1,513,286,226 1,548,084,422 Total Reserves 1,513,286,226 1,548,084,422

The Revaluation Reserve arises on the revaluation of Land and Buildings. Where revalued Land or Buildings are sold, the portion of the Revaluation Reserve that relates to that asset, and is effectively realised, is transferred directly to Accumulated Surplus. Distributions from the Revaluation Reserve can be made when it is in accordance with the requirements of the municipality’s accounting policy. The payment of cash distributions out of the reserve is restricted by the terms of the municipality’s accounting policy. These restrictions do not apply to any amounts transferred to the Accumulated Surplus. Council do not currently intend to make any distribution from the Revaluation Reserve. Refer to Statement of Changes in Net Assets for more detail and the movement on Reserves.

4. ACCUMULATED SURPLUS / (DEFICIT)

Total Accumulated Surplus 2,503,727,154 2,509,655,396

Refer to Statement of Changes in Net Assets for more detail and the movement on Accumulated Surplus. Accumulated surplus has been restated according to GRAP 3. Refer to Note 41 on "Restatement of Prior Year Figures and Adjustments" for details of the restatement.

5. BORROWINGS Total Borrowings Annuity Loans 1,630,703,698 1,504,630,706 Finance Leases 5,227,621 4,429,996 Sub-total 1,635,931,318 1,509,060,702 Less : Current portion transferred to current liabilities (187,045,137) (174,527,048) Annuity Loans (184,388,046) (171,335,664) Finance Leases (2,657,091) (3,191,384) Non-current Borrowings 1,448,886,182 1,334,533,654 Annuity Loans 1,446,315,652 1,333,295,042 Finance Leases 2,570,530 1,238,612

5.1 Summary of Arrangements

Annuity Loans are repaid over periods varying from 3 to 10 (2018: 3 to 10) years and at interest rates varying from 6.75% to 12.278% (2018: 6.75% to 12.65%) per annum. Annuity Loans are not secured. The fair value of borrowings was determined after considering the standard terms and conditions of agreements entered into between the municipality and the relevant financing institutions. Refer to Appendix "A" for more detail on borrowings.

58 DRAKENSTEIN MUNICIPALITY NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 Restated 2019 2018 R R

5.2 Obligations under Finance Leases The Municipality as Lessee: The obligations under Finance Leases are as follow:

Minimum lease payments payable Payable within one year 3,027,669 3,436,732 Payable within two to five years 2,807,932 1,325,827 Payable after five years 0 0 Total minimum lease payments 5,835,601 4,762,559 Less: future finance charges (607,980) (332,563) Present value of minimum lease payments 5,227,621 4,429,996

Present value of minimum lease payments

Payable within one year 2,657,091 3,191,384 Payable within two to five years 2,570,530 1,238,612 Payable after five years 0 0 Present value of lease obligations 5,227,621 4,429,996

Finance leases were entered into for certain photocopier machines for a lease period of 36 months, electronic cashboxes/drop safes for a lease period of 48 months and a mobile containerised substation lease period of less than 1 year. Interest rates are fixed at the inception of the agreements. No arrangements have been entered into for contingent rental payments. The minimum lease payments equals the fair value of the equipment. Finance Leases has been restated according to GRAP 3. Refer to Note 41 on "Restatement of Prior Year Figures and Adjustments" for details of the restatement.

6. EMPLOYEE BENEFITS Non-Current Employee benefits Post Employment Health Care Benefits 132,524,000 116,917,000 Ex-Gratia Pension Benefits 1,891,000 2,297,000 Long service awards 35,565,000 35,846,000 169,980,000 155,060,000 Current Employee benefits 94,162,998 62,265,681 Post Employment Health Care Benefits 8,816,000 7,568,000 Ex-Gratia Pension Benefits 151,000 218,000 Long service awards 5,757,000 3,440,000 Provision for bonusses 17,604,049 15,233,132 Provision for performance bonusses 0 1,509,190 1,428,712 Staff leave provision 37,496,639 34,377,837 Provision for TASK backpay 22,829,120 0 Total Employee benefits 264,142,998 217,325,681

Employee Benefits has been restated according to GRAP 3. Refer to Note 41 on "Restatement of Prior Year Figures and Adjustments" for details of the restatement. 6.1 Post Employment Health Care Benefits The municipality provides certain post-retirement medical benefits by funding the medical aid contributions of qualifying retired members of the municipality. According to the rules of the Medical Aid Funds, with which the municipality is associated, a member (who is on the current conditions of service) is entitled to remain a continued member of such medical aid fund on retirement, in which case the municipality is liable for a certain portion of the medical aid membership fee. The municipality operates an unfunded defined benefit plan for these qualifying employees. The most recent actuarial valuations of plan assets and the present value of the defined benefit obligation were carried out at 30 June 2019 by Mr Niel Fourie and Mr Julian van der Spuy of ZAQEN Actuaries Pty (Ltd). The present value of the defined benefit obligation, and the related current service cost and past service cost, were measured using the Projected Unit Credit Method.

The Post Employment Health Care Benefit Plan is a defined benefit plan, of which the members are made up as follow:

In-service Members (Employees) 725 639 Continuation Members (Retirees) 221 202 Total Members 946 841

59 DRAKENSTEIN MUNICIPALITY NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 Restated 2019 2018 R R

The liability in respect of past service has been estimated as follow:

In-service Members 57,894,000 53,961,000 Continuation Members 83,446,000 70,524,000 Total Liability 141,340,000 124,485,000

The municipality makes monthly contributions for health care arrangements to the following Medical - Bonitas - Hosmed - Key Health - LA Health - Fed Health - Samwumed

The Future-service Cost for the ensuing year is estimated to be R 3,734,000 whereas the Interest Cost is estimated to be R 13,766,000.

The principal assumptions used for the purposes of the actuarial valuations were as follow: i) Rates of Interest Discount Rate Yield curve Yield curve CPI (Consumer Price Inflation) Difference Difference between nominal between nominal and yield curve and yield curve Health Care Cost Inflation Rate CPI+1% CPI+1% Net Effective Discount Rate Yield curve based Yield curve based

GRAP 25 defines the determination of the Discount rate assumption to be used as follow: “The discount rate that reflects the time value of money is best approximated by reference to market yields at the reporting date on government bonds. Where there is no deep market in government bonds with a sufficiently long maturity to match the estimated maturity of all the benefit payments, an entity uses current market rates of the appropriate term to discount shorter term payments, and estimates the discount rate for longer maturities by extrapolating current market rates along the yield curve.”

The Actuaries used the nominal and real zero curves as at 29 June 2019 supplied by the JSE to determine the discount rates and CPI assumptions at each relevant time period. In the event that the valuation is performed prior to the effective valuation date, they used the prevailing yield at the time of performing their calculations. The methodology was changed from a point estimate to that of a curve in order to present a more accurate depiction of the liability. Previously only one discount rate was used to value all the liabilities. This changed methodology would be seen as a change in estimate basis.

ii) Mortality rates Mortality before retirement has been based on the SA 85-90 mortality tables. These are the most commonly used tables in the industry. Mortality post-employment (for pensioners) has been based on the PA (90) ultimate mortality tables. No explicit assumption was made about additional mortality or health care costs due to AIDS. iii) Normal retirement age The average retirement age for all active employees was assumed to be 63 years. This assumption implicitly allows for ill-health and early retirements. The normal retirement age (NRA) for all active employees was assumed to be 65 years. The amounts recognised in the Statement of Financial Position are as follow: Fair value of plan assets 0 0 Unrecognised Actuarial Gains / (Losses) 0 0 Present value of unfunded obligations 141,340,000 124,485,000 Total Benefit Liability 141,340,000 124,485,000

The amounts recognised in the Statement of Financial Performance are as follow: Current service cost 3,348,000 3,440,000 Interest cost 12,156,000 11,872,000 Actuarial losses / (gains) recognised 10,861,605 39,479

Total Post-retirement Benefit included in Employee Related Costs (Note 31) 26,365,605 15,351,479

60 DRAKENSTEIN MUNICIPALITY NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 Restated 2019 2018 R R

Movements in the present value of the Defined Benefit Obligation were as follow: Balance at the beginning of the year 124,485,000 118,305,000 Service costs 3,348,000 3,440,000 Interest cost 12,156,000 11,872,000 Benefits paid (9,510,605) (9,171,479) Actuarial losses / (gains) recognised 10,861,605 39,479 Present Value of Fund Obligation at the end of the year 141,340,000 124,485,000

Movements in the present value of the Defined Benefit Assets were as follow: Balance at the beginning of the year 0 0 Contributions from the employer 9,510,605 9,171,479 Benefits paid (9,510,605) (9,171,479)

Balance at the end of the year 0 0

The history of experienced adjustments are as follow:

2019 2018 2017 2016 2015 R R R R R Present Value of Defined 141,340,000 124,485,000 118,305,000 126,078,000 127,693,000 Fair Value of Plan Assets 0 0 0 0 0 Deficit 141,340,000 124,485,000 118,305,000 126,078,000 127,693,000

Experienced adjustments on 0 0 0 0 0

The effect of a 1% movement in the assumed rate of health care cost inflation is as follow: +1% Increase -1% Decrease Effect on the defined benefit obligation 144,428,000 137,293,000 Effect on the aggregate of the interest cost 14,076,000 13,358,000 Effect on the aggregate of the current service cost 3,818,000 3,608,000

Total accrued liability +20% Mortality -20% Mortality Rate Rate The effect of a 20% movement in the assumed mortality rates are as follow on the ensuing years assumptions: Total accrued liability 133,391,000 150,721,000 Effect on the aggregate of the interest cost 12,967,000 14,708,000 Effect on the aggregate of the current service cost 3,512,000 3,984,000

The municipality expects to make a contribution of R 8,816,000 to the Defined Benefit Plan during the next financial year.

Refer to Note 50 "Retirement Benefit Information" to the Annual Financial Statements for more information regarding the municipality's other retirement funds that is Provincially and Nationally administered.

6.2 Ex-Gratia Pension Benefits The Municipality provides pension and retirement gratuity benefits to certain employees who were in the employment of the former Paarl and Wellington Municipalities (now incorporated into the Drakenstein Municipality) at 31 December 1994 (Paarl) and 31 March 1995 (Wellington) and still in the employment of Drakenstein Municipality at date of normal retirement, medical disability, retrenchment or death. The gratuity is calculated on the salary benefits during 1994/1995.

The most recent actuarial valuations of plan assets and the present value of the defined benefit obligation were carried out at 30 June 2019 by Mr Niel Fourie and Mr Julian van der Spuy of ZAQEN Actuaries Pty (Ltd). The present value of the defined benefit obligation, and the related current service cost and past service cost, were measured by multipying the annual pension provided, by an appropriate annuity factor as at the valuation date.

61 DRAKENSTEIN MUNICIPALITY NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 Restated 2019 2018 R R

The Ex-Gratia Pension Benefit Plan is a defined benefit plan, of which the members are made up as follow:

In-service Members (Employees) 188 200 Continuation Members (Retirees) 8 15 Total Members 196 215

The liability in respect of past service has been estimated as follow: In-service Members 0 0 Continuation Members 2,042,000 2,515,000 Total Liability 2,042,000 2,515,000

Lump Sum Benefit 1,321,000 1,473,000 Pension Benefit 721,000 1,042,000 2,042,000 2,515,000

The interest-cost for the next year is estimated to be R 155,000. The actuaries are of opinion that future service cost need not be determined for pension fund liability as all benefits vests immediately.

The principal assumptions used for the purposes of the actuarial valuations were as follow: i) Rates of Interest Lump sum Lump sum valuation valuation Discount Rate 8.06% 8.40% Consumer Price Inflation (CPI) 4.80% 5.69% Pension increase rate - pensioners 5.80% 6.69% Net Effective Discount Rate 2.14% 1.60%

Pensioner Pensioner Valuation Valuation Discount Rate 7.80% 8.58% Consumer Price Inflation (CPI) 4.60% 5.78% Pension increase rate - pensioners 5.60% 6.78% Net Effective Discount Rate 2.08% 1.69%

In accordance with GRAP 25 the discount rate was determined using the implied duration of the liability to obtain an appropriate interest rate on the yield curve. The nominal and real zero curves as at 29 June 2019 supplied by the JSE was used to determine the discounted rates and CPI assumptions. ii) Mortality rates Mortality before retirement has been based on the PA (90) mortality tables. These are the most commonly used tables in the industry. It was assumed that female spouses would be five years younger than their male spouses and vice versa.

iii) Normal retirement age The average retirement age for all active employees was assumed to be 63 years. This assumption implicitly allows for ill-health and early retirements. The normal retirement age (NRA) for all active employees was assumed to be 65 years.

The amounts recognised in the Statement of Financial Position are as follow: Fair value of plan assets 0 0 Unrecognised actuarial gains / (losses) 0 0 Present value of unfunded obligations 2,042,000 2,515,000 Total Benefit Liability 2,042,000 2,515,000

The amounts recognised in the Statement of Financial Performance are as follow: Current service cost 0 0 Interest cost 204,000 224,000 Actuarial losses / (gains) recognised (548,592) (151,764) Total Post-retirement Benefit included in Employee Related Costs (Note 31) (344,592) 72,236

62 DRAKENSTEIN MUNICIPALITY NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 Restated 2019 2018 R R

Movements in the present value of the Defined Benefit Obligation were as follow: Balance at the beginning of the year 2,515,000 2,591,000 Service costs 0 0 Interest cost 204,000 224,000 Benefits paid (128,408) (148,236) Actuarial losses / (gains) recognised (548,592) (151,764) Present Value of Fund Obligation at the end of the year 2,042,000 2,515,000

Movements in the present value of the Defined Benefit Assets were as follow: Balance at the beginning of the year 0 0 Contributions from the employer (128,408) (148,236) Benefits paid 128,408 148,236 Balance at the end of the year 0 0

The history of experienced adjustments is as follow:

2019 2018 2017 2016 2015 R R R R R Present Value of Defined 2,042,000 2,515,000 2,591,000 3,369,000 3,964,000 Fair Value of Plan Assets 0 0 0 0 0 Deficit 2,042,000 2,515,000 2,591,000 3,369,000 3,964,000

Experienced adjustments on 0 0 0 0 0

The effect of a 1% movement in the assumed rate of pension increase inflation is as follow: 1% Decrease 1% Increase Effect on the interest cost 152,000 159,000 Effect on the defined benefit obligation 1,999,000 2,089,000

The municipality expects to make a contribution of R 151,000 to the Defined Benefit Plan during the next financial year.

Refer to Note 50 "Retirement Benefit Information" to the Annual Financial Statements for more information regarding the municipality's other retirement funds that is Provincially and Nationally administered.

6.3 Provision for long service awards Provision for Long Service Awards 41,322,000 39,286,000 41,322,000 39,286,000 Less: Transfer to Current Provisions (5,757,000) (3,440,000) Total Non-current Provisions 35,565,000 35,846,000

Long Service Awards

The municipality operates a funded defined benefit plan for all its employees. Under the plan, a Long- service Award is payable after 10 years of continuous service and every 5 years thereafter to employees. The provision is an estimate of the long-service based on historical staff turnover. No other long-service benefits are provided to employees. The most recent actuarial valuations of plan assets and the present value of the defined benefit obligation were carried out at 30 June 2019 by Mr Niel Fourie and Mr Julian van der Spuy of ZAQEN Actuaries Pty (Ltd). The present value of the defined benefit obligation, and the related current service cost and past service cost, were measured using the Projected Unit Credit Method.

At year end, 1,850 employees were eligible for Long-services Awards.

The principal assumptions used for the purposes of the actuarial valuations were as follow: Discount Rate Yield curve Yield curve CPI (Consumer Price Inflation) Difference Difference between nominal between nominal and yield curve and yield curve

Normal Salary Increase Rate CPI+1% CPI+1% Net Effective Discount Rate Yield curve based Yield curve based

63 DRAKENSTEIN MUNICIPALITY NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 Restated 2019 2018 R R

GRAP 25 defines the determination of the Discount rate assumption to be used as follow: “The discount rate that reflects the time value of money is best approximated by reference to market yields at the reporting date on government bonds. Where there is no deep market in government bonds with a sufficiently long maturity to match the estimated maturity of all the benefit payments, an entity uses current market rates of the appropriate term to discount shorter term payments, and estimates the discount rate for longer maturities by extrapolating current market rates along the yield curve.”

The Actuaries used the nominal and real zero curves as at 29 June 2019 supplied by the JSE to determine the discount rates and CPI assumptions at each relevant time period. In the event that the valuation is performed prior to the effective valuation date, they used the prevailing yield at the time of performing their calculations. The methodology was changed from a point estimate to that of a curve in order to present a more accurate depiction of the liability. Previously only one discount rate was used to value all the liabilities. This changed methodology would be seen as a change in estimate basis.

The amounts recognised in the Statement of Financial Position are as follow: Fair value of plan assets 0 0 Present value of unfunded obligations 41,322,000 39,286,000 Total Benefit Provision 41,322,000 39,286,000

The amounts recognised in the Statement of Financial Performance are as follow: Current service cost 2,826,000 2,462,000 Interest cost 3,899,000 3,471,000 Actuarial Losses / (gains) recognised (1,540,266) 2,131,814 Total expense included in Employee Related Costs (Note 30) 5,184,734 8,064,814

Movements in the present value of the Defined Benefit Obligation were as follow: Balance at the beginning of the year 39,286,000 34,108,000 Current service costs 2,826,000 2,462,000 Interest cost 3,899,000 3,471,000 Benefits paid (3,148,734) (2,886,814) Actuarial Losses / (gains) recognised (1,540,266) 2,131,814 Balance at the end of the year 41,322,000 39,286,000

Total Current Provisions at end of the year 5,757,000 3,440,000 Total Non-current Provisions at end of the year 35,565,000 35,846,000 Total Provisions at the end of the year 41,322,000 39,286,000

Movements in the present value of the Defined Benefit Assets were as follow: Balance at the beginning of the year 0 0 Contributions from the employer 3,148,734 2,886,814 Benefits paid (3,148,734) (2,886,814) Balance at the end of the year 0 0 The effect of a 1% movement in the withdrawal rates are as follow on the ensuing years assumptions: 1% Decrease 1% Increase Effect on the defined benefit obligation 38,666,000 44,343,000 Effect on the aggregate of the current service cost 2,802,000 3,320,000 Effect on the aggregate of the interest cost 3,811,000 4,399,000

-20% Withdrawal +20% rate Withdrawal rate The effect of a 20% movement in the withdrawal rates are as follow on the ensuing years assumptions: Effect on the defined benefit obligation 43,279,000 39,629,000 Effect on the aggregate of the current service cost 3,288,000 2,837,000 Effect on the aggregate of the interest cost 4,292,000 3,908,000

The municipality expects to make a contribution of R5,757,000 to the defined benefit plan during the next financial year. The Future-service Cost for the ensuing year is estimated to be R3,045,000 whereas the Interest Cost is estimated to be R4,089,000.

64 DRAKENSTEIN MUNICIPALITY NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 Restated 2019 2018 R R

6.4 Provision for bonuses The movement in Provisions for bonuses are reconciled as follow:

Provision for bonuses Balance at beginning of year 15,233,132 12,932,103 Net movement 2,370,917 2,301,029 Balance at the end of the year 17,604,049 15,233,132 Balance of Current Provisions for Bonuses at beginning of year 15,233,132 12,932,103 Balance of Current Provisions for Bonuses at end of year 17,604,049 15,233,132

Service bonuses are granted to municipal employees as a 13th cheque. An estimate amount for the provision raised is determined according to the amount accruing to employees up to June from their previous bonus payment.

6.5 Provision for performance bonuses Provision has been made for performance bonuses in accordance with the performance agreements with each Executive Manager and the Municipal Manager using the best estimate of the potential performance bonus payable. The actual bonuses will only be paid once the evaluation committee appointed in terms of the Performance Management regulations has reviewed the performance agreements of the Executive Management team and made a recommendation to the Council for final approval. This process will be performed once the draft annual report for the 2018/19 year has been submitted to Council in January 2020. The performance bonuses have been provided as follow:

Strategic Management Team Leibbrandt, JH (City Manager) 278,236 225,617 Carstens, J (Chief Financial Officer ) 223,545 184,441 Boshoff, GBF (Executive Director: Community Services) (Until 31 August 2018) 38,970 221,841 Johaar, S (Executive Director: Corporate Services) 223,545 184,441 Hattingh, D (Executive Director: Engineering Services) (Until 12 April 2019) 175,110 184,441 Waring, L (Executive Director: Planning and Development) 223,544 212,092 Esau, G (Executive Director: Community Services) (From 1 November 2018) 130,401 0 1,293,351 1,212,873 The movement in Provisions are reconciled as follow: Provision for performance bonuses Balance at beginning of year 1,428,712 1,250,281 Bonuses paid (1,010,876) (450,027) Reversal of prior year provision (201,997) (584,415) Increase in provision 1,293,351 1,212,873 Balance at the end of the year 1,509,190 1,428,712

Balance of Current Provisions for performance bonuses at beginning of year 1,428,712 1,250,281 Balance of Current Provisions for performance bonuses at end of year 1,509,190 1,428,712

Included in the balance of the provision is an amount of R215,839 (2018: R215,839) pertaining to the 2015/16 and 2016/17 performance evaluation that has not yet been paid to Ms AME De Beer as at 30 June 2019.

6.6 Staff leave Staff Leave provision 37,496,639 34,377,837

6.7 Provision for TASK backpay Provision for TASK backpay 22,829,120 0

Included in Employee cost is a provision for TASK backpay, due to the revaluation of post on TASK and the movement from the "Van Der Merwe" Salary scales to the TASK salary scales.

65 DRAKENSTEIN MUNICIPALITY NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 Restated 2019 2018 R R

7. PROVISIONS Provision for rehabilitation of landfill sites The movement in Non-current Provisions are reconciled as follow: Landfill site Balance at beginning of year 165,816,002 144,183,096 Changes in estimates 17,803,237 31,301,032 Rehabilitation expenditure during the year (19,213) (9,668,126) Balance of Provisions for Rehabilitation at end of year 183,600,026 165,816,002

Balance of Current Provisions for Rehabilitation at end of year 0 0 Balance of Non-current Provisions for Rehabilitation at end of year 183,600,026 165,816,002 Balance of Provisions for Rehabilitation at end of year 183,600,026 165,816,002

The council will incur further rehabilitation cost on its unrehabilitated dumping/landfill sites over the period 2020/21 up to 2023/24. Provision has been made for the net present value of this cost based on the status quo as at 30 June 2019. Future interventions such as the proposed management of the Wellington Landfill site may in future adjust the date and cost of rehabilitation.

Location Proposed rehabilitation date - 30 June 2019

Wellington Existing 2023/2024 60,770,822 45,794,991 Wellington Old 2023/2024 35,001,213 32,065,401 Dal Josafat 2022/2023 13,193,300 13,793,973 Orleans 2020/2021 26,398,034 24,275,094 Boy Louw (Zanddrift) 2021/2022 48,236,657 49,886,543 183,600,026 165,816,002

JPCE is a consulting engineering and environmental consulting firm appointed to determine a high-level concept-design stage costing-value (amount) to cap and rehabilitate the landfill sites at the end of the current Financial Year (2018/2019) Their independence from management is monitored. The firm is a member and fully subscribes to the Constitution and Code of Conduct of the Council of Engineers of South Africa. Based on the work provided by JPCE, an applicable inflation rate of 4.7%-5.4% has been determined and a discounted rate of 6.36%-7.25% has been utilised. The funding required by the municipality to fund the rehabilitation has been assessed and based on the governement bond rates with similiar maturity periods. The municipality assessed the effect of discounting coupled with the future inflation rate to approximate the current cost of the expected rehabilitation cost as disclosed above.

8. CONSUMER DEPOSITS Electricity and Water 57,004,529 44,822,374 Guarantees held in lieu of Electricity and Water Deposits Guarantees held in lieu of Electricity and Water Deposits were R 16,063,607 (2018: R 19,018,364) Consumer Deposits are paid by consumers on application for new water and electricity connections. The deposits are repaid when the water and electricity connections are terminated. In cases where consumers default on their accounts, the municipality can utilise the deposit as payment for the outstanding account. No interest is paid on Consumer Deposits held. The management of the municipality is of the opinion that the carrying value of Consumer Deposits approximate their fair values. The fair value of Consumer Deposits was determined after considering the standard terms and conditions of agreements entered into between the municipality and its consumers.

66 DRAKENSTEIN MUNICIPALITY NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 Restated 2019 2018 R R

9. TRADE AND OTHER PAYABLES FROM EXCHANGE TRANSACTIONS

Trade Creditors 211,496,129 139,341,045 Eskom Limited (Bulk purchases) 140,032,888 84,291,533 Other Trade Creditors 71,463,241 55,049,512 Payments received in advance 48,718,988 61,468,375 Other payables and accruals Other creditors 12,207,824 28,010,070 Retention 58,481,140 57,848,347 Rental Leases Expenditure : Straight lining 288,486 72,845 Nett VAT accrual on outstanding receivables 31,782,917 30,080,470 VAT accrual on receivables 39,075,397 43,631,027 VAT on provision for doubtful debt (7,292,480) (13,550,557) Total Creditors 362,975,484 316,821,152

The average credit period on purchases is 30 days from the receipt of the statement, as determined by the MFMA. No interest is charged for the first 30 days from the date of receipt of the invoice. Thereafter interest is charged in accordance with the credit policies of the various individual creditors that the municipality deals with. The municipality has financial risk policies in place to ensure that all payables are paid within the credit time frame. The management of the municipality is of the opinion that the carrying value of Creditors approximate their fair values. The fair value of Creditors was determined after considering the standard terms and conditions of agreements entered into between the municipality and other parties. The amount payable to ESKOM included in trade and other payables are for the current account only. The Municipality did not owe ESKOM any debt older than 30 days during 2018/19. The VAT accrual on outstanding receivables, refers to the VAT portion of outstanding receivables, which is not yet payable to SARS, as the Municipality is registered on the payments basis for VAT with SARS, in accordance with Section 15(2)(a) of the Value-Added Tax Act No 89 of 1991.

Payables from exchange transactions has been restated according to GRAP 3. Refer to Note 41 on "Restatement of Prior Year Figures and Adjustments" for details of the restatement.

10. UNSPENT CONDITIONAL GRANTS AND RECEIPTS

Conditional Grants from other spheres of Government 31,354,236 53,749,522 National Government (Unconditional Grants) (0) (0) National Government (Conditional Grants) 639,327 10,643,587 Provincial Government (Conditional Grants) 26,585,297 39,335,163 Other Grants 3,142,404 2,783,564 Guarantees and Donations (Unconditional) 987,208 987,208

Total Conditional Grants and Receipts 31,354,236 53,749,522 These amounts are separately invested in terms of section 12 of the MFMA. Refer note 29 for more detail of grants from National and Provincial Government.

Refer to Appendix "C" for more detail on Conditional Grants. Unspent Conditional Grants and Receipts has been restated according to GRAP 3. Refer to Note 41 on "Restatement of Prior Year Figures and Adjustments " for details of the restatement.

11. PROPERTY, PLANT AND EQUIPMENT Cost Accumulated Carrying Depreciation and Value Impairment

Balance as at 30 June 2019 R R R

Land 913,335,363 0 913,335,363 Buildings, structures and facilities 1,029,143,255 (109,303,120) 919,840,135 Infrastructure 7,207,496,039 (3,163,601,530) 4,043,894,508 Other Assets 341,022,484 (189,116,162) 151,906,322 Capital Spares 8,674,327 0 8,674,327 Total Property, Plant and Equipment 9,499,671,468 (3,462,020,813) 6,037,650,656

67 DRAKENSTEIN MUNICIPALITY NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 Restated 2019 2018 R R

Cost Accumulated Carrying Depreciation and Value Impairment

Restated balance as at 30 June 2018 R R R

Land 920,270,149 0 920,270,149 Buildings, structures and facilities 974,516,606 (61,030,054) 913,486,552 Infrastructure 6,701,490,030 (3,030,603,599) 3,670,886,431 Other Assets 324,427,804 (183,213,127) 141,214,677 Capital Spares 7,783,637 0 7,783,637 Total Property, Plant and Equipment 8,928,488,227 (3,274,846,780) 5,653,641,447

Total Property, Plant and Equipment held by the municipality at 30 June 2019 comprised the amounts analysed as above.

Revaluation of all land & buildings in 2017/18 was performed by Mr. C. Botha, an accredited valuator of HCB Valuators.

RECONCILIATION OF CARRYING VALUE OF PROPERTY, PLANT AND EQUIPMENT

Buildings, Land structures and Infrastructure Other Assets Capital Spares Total facilities

Carrying values at 920,270,149 913,486,552 3,670,886,431 141,214,677 7,783,637 5,653,641,447 1 July 2018 Cost and revaluation 920,270,149 946,200,105 5,827,345,159 324,427,804 7,783,637 8,026,026,855 Cost - assets under 0 28,316,501 874,144,870 0 0 902,461,372 construction (WIP) Accumulated depreciation 0 (61,030,054) (3,030,603,599) (183,213,127) 0 (3,274,846,780) Additions 41,664 27,754,515 182,512,816 30,124,521 0 240,433,517 Work in progress 0 27,233,234 346,955,046 0 0 374,188,280 Other changes 0 0 0 0 890,689 890,689 Depreciation 0 (47,961,326) (144,469,394) (17,318,972) 0 (209,749,693) Impairment 0 (416,500) 0 (590,285) 0 (1,006,785) Carrying value of disposals (6,976,450) (256,340) (11,990,390) (1,523,619) 0 (20,746,800) Cost (6,976,450) (361,100) (23,461,853) (13,529,841) 0 (44,329,244) Accumulated Depreciation 0 104,760 11,471,463 12,006,222 0 23,582,444

Carrying Values at 913,335,363 919,840,135 4,043,894,508 151,906,322 8,674,327 6,037,650,656 30 June 2019 Cost and revaluation 913,335,363 981,999,119 6,199,890,682 341,022,484 8,674,327 8,444,921,975 Cost - assets under 0 47,144,137 1,007,605,357 0 0 1,054,749,493 construction (WIP) Accumulated depreciation & 0 (109,303,120) (3,163,601,530) (189,116,162) 0 (3,462,020,813) Impairment

68 DRAKENSTEIN MUNICIPALITY NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 Restated 2019 2018 R R

Buildings, Land structures and Infrastructure Other Assets Capital Spares Total facilities Restated carrying values at 809,884,341 673,432,465 3,226,584,222 115,505,494 6,429,457 4,831,835,980 1 July 2017 Cost and revaluation 809,884,341 785,264,893 5,556,054,844 281,864,932 6,429,457 7,439,498,467 Cost - assets under 0 26,800,935 575,657,725 0 0 602,458,660 construction (WIP) Accumulated depreciation 0 (138,633,363) (2,905,128,346) (166,359,438) 0 (3,210,121,147) Additions 291,000 43,765,445 65,662,458 42,604,034 0 152,322,937 Work in progress 0 17,293,026 516,947,376 0 0 534,240,402 Revaluation adjustments 121,259,723 230,849,042 0 0 0 352,108,765 Revaluation increase in value 125,233,223 128,148,084 0 0 0 253,381,307 Revaluation elimination of 122,070,435 0 0 0 122,070,435 depreciation Revaluation decrease recognised (3,973,500) (19,369,477) 0 0 0 (23,342,977) in profit/loss Other changes (2,944,215) 0 0 0 1,354,180 (1,590,035) Depreciation 0 (44,576,849) (133,111,710) (16,526,634) 0 (194,215,193) Impairment 0 0 (3,401,344) (354,690) 0 (3,756,034) Carrying value of disposals (8,220,700) (7,276,578) (1,794,571) (13,527) 0 (17,305,375) Cost (8,220,700) (7,386,300) (12,832,372) (41,162) 0 (28,480,534) Accumulated Depreciation 0 109,723 11,037,802 27,635 0 11,175,159 Restated carrying values at 920,270,149 913,486,552 3,670,886,431 141,214,677 7,783,637 5,653,641,447 30 June 2018 Cost and revaluation 920,270,149 946,200,105 5,827,345,159 324,427,804 7,783,637 8,026,026,855 Cost - assets under 0 28,316,501 874,144,870 0 0 902,461,372 construction (WIP) Accumulated depreciation & 0 (61,030,054) (3,030,603,599) (183,213,127) 0 (3,274,846,780) Impairment

Property, Plant and Equipment has been restated according to GRAP 3. Refer to Note 41 on "Restatement of Prior Year Figures and Adjustments " for details of the restatement.

11.1 Significant disposal of Land and Buildings during the year: During the financial period, Drakenstein Municipality transferred the electrical distribution and reticulation network within the Pniel and Hollandse Molen areas (falling within the Stellenbosch municipal area) to Stellenbosch Municipality, for an amount of R16,236,253. The transfer of assets, with a carrying value of R8,767,141, was made upon request from Stellenbosch Municipality, and after approval by both the municipal councils. 11.2 Land and Buildings carried at Fair Value: Land and Buildings were revalued to fair value during the 2017/18 financial period. The effective date of revaluation was 1 July 2017 and the valuation was performed by registered and independent valuers.

11.3 Assets pledged as security: No assets have been pledged as security. 11.4 Impairment of Property, Plant and Equipment: The municipality assessed its items of Property, Plant and Equipment, Intangible assets and Heritage assets for any potential impairment losses on assets. The following impairment losses were recognised during the year: Other Assets: Vehicles 590,285 354,690 Land and Buildings 416,500 23,342,977 (2018: on revaluation, where value decreases exceeded revaluation surplus credit balances) Infrastructure Assets 0 3,401,344 Total impairments recognised 1,006,785 27,099,010 Impairment losses on vehicles were predominantly due to the assets being damaged beyond repair. No impairments were reversed in the current year, and no impairment losses were recognised on revalued assets directly in the Statement of Net assets.

11.5 Change in Estimate - Useful Life of Property, Plant and Equipment reviewed: A review of the useful lives and residual values of items of Property, Plant and Equipment has been performed. The change in the estimated useful lives and residual values of various assets of the municipality has resulted in a decrease in depreciation of R3,196,254 (2018: R4,077,317).

69 DRAKENSTEIN MUNICIPALITY NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 Restated 2019 2018 R R

11.6 Property, plant and equipment in the process of being constructed or developed: No projects were identified where construction or development has been halted, or that is taking a significantly longer period of time to complete than expected. 11.7 Repairs and maintenance Repairs and maintenance per detail asset category and expenditure classifications was as follow:

2018/19 Contracted Employee Operating Asset Category Inventory Operational Cost Grand Total Services Related Cost Leases Buildings, Structures and Facilities 13,552,637 57,392,273 5,155,400 8,021,574 69,955 84,191,840 Infrastructure 28,594,869 95,590,614 14,615,360 13,032,236 191,522 152,024,602 Other Assets 19,905,758 4,866,144 2,291,587 101,538 62,329 27,227,355 62,053,264 157,849,031 22,062,348 21,155,347 323,806 263,443,796

2017/18 (Restated) Contracted Employee Operating Asset Category Inventory Operational Cost Grand Total Services Related Cost Leases Buildings, Structures and Facilities 7,791,832 55,751,732 4,055,786 2,019,750 11,228 69,630,327 Infrastructure 57,603,317 89,929,587 11,934,808 21,826,575 195,154 181,489,440 Other Assets 20,615,777 4,327,038 922,221 158,831 - 26,023,868 86,010,925 150,008,356 16,912,814 24,005,157 206,383 277,143,635

Repairs and maintenance as disclosed above excludes internal transport charges (inter-departmental charges). The repairs and maintenance note has been restated according to GRAP 3. Refer to Note 41 on "Restatement of Prior Year Figures and Adjustments " for details of the restatement.

12. INTANGIBLE ASSETS Cost Accumulated Carrying Amortisation Value R R R Balance as at 30 June 2019 12,579,678 (6,787,384) 5,792,294 Computer Software and Systems 9,696,047 (4,640,028) 5,056,019 Plans and Designs 1,930,927 (1,583,011) 347,916 Licenses and Rights 952,704 (564,345) 388,359

Restated balance as at 30 June 2018 19,799,885 (14,572,209) 5,227,676 Computer Software and Systems 16,590,254 (12,380,473) 4,209,781 Plans and Designs 1,930,927 (1,501,412) 429,516 Licenses and Rights 1,278,703 (690,323) 588,380 The movement in intangible assets are reconciled as follow: Carrying value at the beginning of the year 5,227,677 6,814,991 Cost 19,799,884 19,864,756 Accumulated amortisation and impairment (14,572,208) (13,049,765) Additions resulting from acquisitions 2,231,884 870,645 Amortisation (874,670) (1,537,315) Impairment 0 (884,587) Carrying value of disposal (de-recognition) (792,597) (36,058) Cost (9,452,090) (935,517) Accumulated Surplus 8,659,493 899,459 Carrying value at the end of the year 5,792,294 5,227,677 Cost 12,579,678 19,799,884 Accumulated amortisation and impairment (6,787,384) (14,572,208) The amortisation expense has been included in the line item "Depreciation and Amortisation" in the Statement of Financial Performance (see Note 34). Intangible assets has been restated according to GRAP 3. Refer to Note 41 on "Restatement of Prior year Figures and Adjustments" for details of the adjustment. The amortisation method and useful life of Intangible assets is set out in the accounting policy note of Intangible assets. All of the municipality’s Intangible Assets are held under freehold interests and no Intangible Assets had been pledged as security for any liabilities of the municipality. No restrictions apply to any of the Intangible Assets of the municipality.

70 DRAKENSTEIN MUNICIPALITY NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 Restated 2019 2018 R R

13. INVESTMENT PROPERTY

Land and Buildings Investment property 37,740,000 44,390,000 37,740,000 44,390,000 The fair value model is applied to Investment property. Criteria used to distinguish investment property from owner-occupied property and from property held for sale in the ordinary course of business is set out in the accounting policy note of Investment property.

The movement in investment properties are reconciled as follow:

Carrying value at the beginning of the year 44,390,000 40,650,000 Fair value 44,390,000 40,650,000 Fair value adjustment gain 1,950,000 3,740,000 Disposal of investment property (8,600,000) 0 Carrying value at the end of the year 37,740,000 44,390,000 Fair value 37,740,000 44,390,000

Method of Asset Valuation 2018/19 The date of fair value assessment was on 30 June 2019. Each property was identified and inspected and fair values adjusted where appropriate. An Investment property could be described as a real estate property that has the ability of earning a return on investment, either through rental income and/or the future resale of the property or both. The methodology applied was therefore based on the so-called Open Market Value, taking into account the zoning status of the property, the cost implications of the rezoning process and any other limitations.

A register containing the information required by section 63 of the Municipal Management Finance Act is available for inspection at the registered offices of the municipality. Revaluation of all Investment Property was performed by a Professional Associated Valuer (Reg no. 4729), Jean Marais from Real Direct Property Valuations. Revenue and Expenditure disclosed in the Statement of Financial Performance include rental revenue earned from Investment Property to the amount of R 658,224 (2018 restated: R641,537). All of the municipality’s Investment Property is held under freehold interests and no Investment Property had been pledged as security for any liabilities of the municipality. There are no restrictions on the realisability of Investment Property or the remittance of revenue and proceeds of disposal. There are contractual obligations for repairs to certain Investment Properties which are leased out.

Repairs and maintenance Repairs and maintenance per detail asset category and expenditure classifications was as follow:

2018/19 Contracted Employee Operating Asset Category Inventory Operational Cost Grand Total Services Related Cost Leases Investment property 0 0 0 0 0 0 0 0 0 0 0 0

2017/18 Contracted Employee Operating Asset Category Inventory Operational Cost Grand Total Services Related Cost Leases Investment property 0 0 0 0 0 0 0 0 0 0 0 0

71 DRAKENSTEIN MUNICIPALITY NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 Restated 2019 2018 R R

14. HERITAGE ASSETS

At Revaluation amount 40,523,000 40,523,000 At Cost less Accumulated Impairment Losses 700,700 700,700 41,223,700 41,223,700 The movement in Heritage Assets is reconciled as follow: Historical and Natural Works of Art, Significant Land, Regalia and Total Buildings and Collections Structures Carrying values at 30 June 2018 40,523,000 700,700 41,223,700 Cost 0 700,700 700,700 Accumulated Revaluation 40,523,000 0 40,523,000 Movements during the year Increases in Revaluations 0 0 0 Carrying values at 30 June 2019 40,523,000 700,700 41,223,700 Cost 0 700,700 700,700 Accumulated Revaluation 40,523,000 0 40,523,000

Historical and Natural Works of Art, Significant Land, Regalia and Total Buildings and Collections Structures

Restated carrying values at 1 July 2017 26,842,000 700,700 27,542,700 Cost 0 700,700 700,700 Accumulated Revaluation 26,842,000 0 26,842,000 Accumulated Impairment 0 0 0 Movements during the year Increases in Revaluations 13,681,000 0 13,681,000 Restated carrying values at 30 June 2018 40,523,000 700,700 41,223,700 Cost 0 700,700 700,700 Accumulated Revaluation 40,523,000 0 40,523,000

Land and buildings Heritage assets were revalued to fair value during the 2017/18 financial period. The effective date of revaluation was 1 July 2017 and the valuation was performed by registered and independent valuers.

The compare sales method was applied to land (historical sites and conservation areas), where comparable valid sales in a specific area was used, compared to the specific property, and market valuation derived. Due to the nature of historical buildings and monuments, i.e. where there is no comparable property sales, the generally accepted methodology of these was limited to the discounted replacement cost of the physical structures. Included in the historical and naturally significant land and building above is amongst others the Paarl Mountain (Paarlberg) and the Paarl Arboretum. Paarl Mountain is particularly known for its mountain or "Paarl Rock". The huge granite rock is formed by three rounded outcrops that make up Paarl Mountain and is the second largest granite outcrop in the world and forms part of the Nature Reserve. The site is a Provincial Heritage Site (SAHRA Nr 9/2/069/0028).

The Paarl Arboretum is situated on the eastern bank of the Berg River, is 2.8 km long and occupies approximately 31 ha. Divided into 6 "continents" a unique feature is that trees and shrubs are grouped according to continents of origin. In excess of 2 600 trees and shrubs, entering some 650 different species can be observed.

72 DRAKENSTEIN MUNICIPALITY NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 Restated 2019 2018 R R

The following buildings owned by the Municipality, declared Provincial Heritage sites, have been classified as Heritage assets: 1.De Oude Woning, 214 Main Street, Paarl (SAHRA Nr 9/2/069/0105) dating from the late 1780's. 2.The Old Dutch Reformed Church Parsonage (now the Paarl Museum),Van der Lingen plein, Paarl (SAHRA Nr 9/2/069/0071). The Parsonage was built in 1787. 3. Ouma Granny's House, 37 Fontein Street, Wellington (SAHRA Nr 9/2/106/0012), Victorian cottage dating to 1876. 4. Coronation Arch, Victoria Jubilee Park, Church Street, Wellington (SAHRA Nr 9/2/106/0019/1), dating to 1902. All of the municipality’s Heritage Assets are held under freehold interests and no Heritage Assets had been pledged as security for any liabilities of the municipality. No restrictions apply to any of the Heritage Assets of the municipality. Repairs and maintenance Repairs and maintenance per detail asset category and expenditure classifications was as follow: 2018/19 Contracted Employee Operating Operational Grand Asset Category Inventory Services Related Cost Leases Cost Total Heritage Assets 0 0 0 0 0 0 0 0 0 0 0 0

2017/18 Contracted Employee Operating Operational Grand Asset Category Inventory Services Related Cost Leases Cost Total Heritage Assets 249,056 0 0 0 0 249,056 249,056 0 0 0 0 249,056

15. NON-CURRENT INVESTMENTS

Listed Eskom stock at fair value 124,968 128,762 Total listed investments 124,968 128,762 The fair value of the listed investments is estimated at R 124,968 (2018: R 128,762). Fair value of Eskom stock is determined based on discounted cash flow analysis, at a discounted rate of 7.570%, (2018: 8.4650%). Listed Shares are investments with a maturity period of more than 12 months and earn fixed interest rates of 13.5% per annum. The investment will mature in three equal tranches on 1 August 2019, 2020 and 2021. The fair value of Investments was determined after considering the standard terms and conditions of agreements entered into between the municipality and financial institutions.

16. NON-CURRENT RECEIVABLES FROM EXCHANGE TRANSACTIONS Gross Impairment Net Balances Provision Balances As at 30 June 2019 R R R Public organisations 77,834 0 77,834 Housing selling scheme loans 1,102,639 (195,505) 907,134 1,180,473 (195,505) 984,968 Less: Current Portion transferred to Current Receivables:- 150,118 Public organisations 0 Housing selling scheme loans 150,118 Total Receivables from Exchange Transactions 834,850 As at 30 June 2018 R R R Public organisations 77,834 0 77,834 Housing selling scheme loans 2,036,633 (529,388) 1,507,245 2,114,466 (529,388) 1,585,078

Less: Current Portion transferred to Current Receivables:- 329,048 Public organisations 0 Housing selling scheme loans 329,048 Total Receivables from Exchange Transactions 1,256,030

73 DRAKENSTEIN MUNICIPALITY NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 Restated 2019 2018 R R

Public Organisations Loans to public organisations are granted in terms of the National Housing Policy. The applicable interest rate and loan repayment periods are determined by the National Minister of Housing. At present these loans attract interest at 1% (buildings) and 11% (infrastructure) and are repayable over 30 years. Housing selling scheme loans Housing loans are granted to qualifying individuals in terms of the National Housing Policy. These loans attract interest, as determined by the National Minister of Housing, currently 13,5% per annum and are repayable over 20 years.

16.1 Reconciliation of the Provision for Impairment Balance at beginning of year 529,388 128,207 Net movement (333,883) 401,181 Balance at end of year 195,505 529,388

In determining the recoverability of a Long-term Receivable, the municipality considers any change in the credit quality of the receivable from the date credit was initially granted up to the reporting date. The concentration of credit risk is limited due to the customer base being large and unrelated. Accordingly, the management believe that there is no further credit provision required in excess of the Provision for Impairment.

17. INVENTORY

Consumable stores 3,817,729 4,830,273 Maintenance materials 26,377,044 23,092,413 Water 644,438 849,011 Spare parts for Plant & Equipment 170,467 376,168 Plants held for resale 46,467 379,194 Land for BNG housing 2,944,215 2,944,215 Less: Inventory held as spare parts for infrastructure assets (8,674,324) (7,783,633) Total Inventory 25,326,036 24,687,641

No inventories were pledged as security for liabilities. During the year inventory to the amount of R29,103 (2018: R 108,344) was written off due to discrepancies identified during the annual stock count. An amount of R 85,080 (2018: R 95,763) was written off due to valuation of inventory at the lower of cost and NRV in accordance with GRAP 13.

Inventories of R 8,674,324 (2018: R 7,783,690) are held as major spare parts for infrastructure assets and has been transferred to Property, Plant and Equipment.

18. VAT

VAT (Payable) / Receivable (4,000,227) 48,471,827 Total VAT (4,000,227) 48,471,827

No interest is payable to SARS if the VAT is paid over timeously, but interest for late payments is charged according to the VAT Act. The municipality has financial risk policies in place to ensure that payments are affected before the due date. Value Added Tax has been restated according to GRAP 3. Refer to Note 41 on "Restatement of Prior Year Figures and Adjustments" for details of the restatement.

74 DRAKENSTEIN MUNICIPALITY NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 Restated 2019 2018 R R

19. TRADE AND OTHER RECEIVABLES FROM EXCHANGE TRANSACTIONS

Consumer receivables from exchange transactions 256,714,670 237,356,224 Other receivables from exchange transactions 19,361,035 11,476,533 Total Receivables from Exchange Transactions 276,075,704 248,832,757

19.1 Consumer receivables from exchange transactions Gross Provision for Net As at 30 June 2019 Balances Impairment Balance

Service debtors 310,678,748 (60,121,846) 250,556,903 Trade: Electricity 151,594,570 (11,774,320) 139,820,250 Water 96,772,855 (38,617,864) 58,154,992 Waste Management (solid waste) 37,324,055 (5,874,966) 31,449,088.48 Waste Water Management (sewerage and sanitation) 24,987,269 (3,854,696) 21,132,573 Housing Rental Schemes 7,961,873 (2,427,644) 5,534,230 Housing Selling Schemes 812,418 (188,880) 623,537 Total 319,453,039 (62,738,370) 256,714,670 Gross Provision for Net As at 30 June 2018 Balances Impairment Balance

Service debtors 342,135,366 (106,696,735) 235,438,631 Trade: Electricity 146,321,652 (11,202,906) 135,118,746 Water 127,353,274 (82,891,896) 44,461,378 Waste Management (solid waste) 41,395,906 (7,876,317) 33,519,589 Waste Water Management (sewerage and sanitation) 27,064,534 (4,725,616) 22,338,918 Housing Rental Schemes 8,450,936 (6,741,508) 1,709,428 Housing Selling Schemes 851,493 (643,328) 208,165 Total 351,437,795 (114,081,571) 237,356,224

The average credit period for Consumer receivables is 30 days. No interest is charged on trade receivables for the first 30 days from the date of the invoice. Thereafter interest is charged at the prime rate per annum on the outstanding balance. The municipality strictly enforces its approved credit control policy to ensure the recovery of Consumer receivables. The management of the municipality is of the opinion that the carrying value of Consumer receivables approximate their fair values. The fair value of Consumer receivables was determined after considering the standard terms and conditions of agreements entered into between the municipality and Consumer receivables as well as the current payment ratio's of the municipality's Consumer receivables.

Analysis of Consumer receivables Age in Days Not due Past due As at 30 June 2019 Current Current 31 - 60 31 - 60 impaired 61 - 90 61 - 90 impaired impaired R R R R R R Electricity 127,687,030 624,473 3,829,582 714,450 1,450,400 793,524 Water 21,528,481 2,086,808 6,541,726 2,381,347 4,554,630 2,618,444 Waste Management 8,120,241 335,583 1,940,969 368,246 1,378,682 367,654 Waste Water Management 7,345,533 243,839 1,416,361 260,471 901,248 250,898 Housing Rental Schemes 420,588 48,945 317,039 54,011 277,983 81,584 Housing Selling Schemes 29,515 4,298 24,143 5,467 20,922 5,783 Total 165,131,387 3,343,946 14,069,819 3,783,991 8,583,865 4,117,888 Past due As at 30 June 2019 91 - 120+ Total - Past due 91 - 120+ Total Total impaired impaired but not impaired R R R R R Electricity 18,627,558 9,641,872 151,594,570 11,774,319 12,757,694 Water 64,148,018 31,531,265 96,772,855 38,617,864 38,713,318 Waste Management 25,884,162 4,803,483 37,324,055 5,874,966 23,664,431 Waste Water Management 15,324,128 3,099,489 24,987,269 3,854,696 14,030,879 Housing Rental Schemes 6,946,263 2,243,105 7,961,873 2,427,644 5,162,586 Housing Selling Schemes 737,838 173,332 812,418 188,880 598,320 Total 131,667,967 51,492,546 319,453,039 62,738,370 94,927,228

75 DRAKENSTEIN MUNICIPALITY NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 Restated 2019 2018 R R

Analysis of Consumer Debtors Age in Days Not due Past due As at 30 June 2018 Current Current 31 - 60 31 - 60 impaired 61 - 90 61 - 90 impaired impaired R R R R R R Electricity 122,835,585 784,147 3,329,875 791,908 1,788,408 800,749 Water 31,637,521 3,650,265 10,769,817 4,811,049 8,618,445 5,687,860 Waste Management 6,170,119 170,391 1,872,669 255,446 1,489,677 319,072 Waste Water Management 5,959,187 125,218 1,331,870 171,561 968,371 213,339 Housing Rental Schemes 433,320 6,877 281,116 28,091 261,580 39,119 Housing Selling Schemes 40,908 9,616 31,640 9,646 25,360 9,793 Total 167,076,639 4,746,514 17,616,987 6,067,701 13,151,842 7,069,932

Past due As at 30 June 2018 91 - 120+ Total - Past due 91 - 120+ Total Total impaired impaired but not impaired R R R R R Electricity 18,367,785 8,826,102 146,321,652 11,202,906 13,067,309 Water 76,327,490 68,742,722 127,353,274 82,891,896 16,474,122 Waste Management 31,863,440 7,131,408 41,395,906 7,876,317 27,519,861 Waste Water Management 18,805,106 4,215,498 27,064,534 4,725,616 16,504,949 Housing Rental Schemes 7,474,921 6,667,421 8,450,936 6,741,508 1,282,986 Housing Selling Schemes 753,585 614,273 851,493 643,328 176,873 Total 153,592,327 96,197,424 351,437,795 114,081,571 75,026,100 In determining the recoverability of a Consumer receivable, the municipality considers any change in the credit quality of the Consumer receivable from the date credit was initially granted up to the reporting date. The concentration of credit risk is limited due to the customer base being large and unrelated. Accordingly, the management believe that there is no further credit provision required in excess of the Allowance for Doubtful Debts. Included in the Allowance for Doubtful Debts are individually impaired Consumer receivables with a balance of R400,868 (2017: R805,120) which have been placed under liquidation. The impairment recognised represents the difference between the carrying amount of these Consumer receivables and the present value of the expected liquidation proceeds. The municipality holds no collateral over these balances. 19.2 Other receivables from exchange transactions Sundry debtors 14,855,928 19,127,547 Other receivables from exchange transactions 8,041,881 5,427,290 Less : Provision for Impairment (3,536,774) (13,078,304) Total Other Debtors from exchange transactions 19,361,035 11,476,533

Reconciliation of Impairment provision Balance at beginning of the year 13,078,304 5,228,283 Net movement (9,541,530) 7,850,021 Balance at year end 3,536,774 13,078,304 Trade and other receivables from exchange transactions have been restated according to GRAP 3. Refer to Note 41 on "Restatement of Prior Year Figures and Adjustments" for details of the restatement.

76 DRAKENSTEIN MUNICIPALITY NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 Restated 2019 2018 R R

20. RECEIVABLES FROM NON-EXCHANGE TRANSACTIONS Consumer receivables from non-exchange transactions 35,635,283 40,016,122 Other receivables from non-exchange transactions 46,403,195 48,557,807 Total Receivables from Non-exchange Transactions 82,038,477 88,573,929 20.1 Consumer receivables from non-exchange transactions Gross Balances Provision for Net Balance Impairment As at 30 June 2019 Service debtors 38,295,903 (5,801,087) 32,494,816 Rates 38,295,903 (5,801,087) 32,494,816 Fines 122,854,232 (119,713,765) 3,140,467 Total 161,150,135 (125,514,852) 35,635,283

Gross Balances Provision for Net Balance RESTATED Impairment As at 30 June 2018 Service debtors 38,648,531 (5,628,517) 33,020,014 Rates 38,648,531 (5,628,517) 33,020,014 Fines 117,187,207 (110,191,099) 6,996,108 Total 155,835,737 (115,819,616) 40,016,122 Analysis of Consumer Debtors Age in Days Not due Past due As at 30 June 2019 Current Current 31 - 60 31 - 60 impaired 61 - 90 61 - 90 impaired impaired R R R Rates 20,056,772 568,777 2,503,082 570,944 966,592 484,614 Fines 3,409,553 2,903,971 6,119,095 5,193,433 4,976,074 3,843,728 Total 23,466,325 3,472,748 8,622,177 5,764,378 5,942,666 4,328,343 Past due 91 - 120+ Total - Past due 91 - 120+ Total Total impaired impaired but not impaired R R Rates 14,769,456 4,176,752 38,295,903 5,801,087 13,006,821 Fines 108,349,511 107,772,633 122,854,232 119,713,765 2,634,885 Total 123,118,967 111,949,384 161,150,135 125,514,852 15,641,705

Analysis of Consumer Debtors Age in Days RESTATED Not due Past due As at 30 June 2018 Current Current 31 - 60 31 - 60 impaired 61 - 90 61 - 90 impaired impaired R R R Rates 16,836,747 254,463 2,778,981 262,410 1,409,216 284,485 Fines 8,738,873 7,012,444 12,760,078 10,248,234 7,665,852 5,948,045 Total 25,575,621 7,266,907 15,539,060 10,510,644 9,075,069 6,232,530

Past due 91 - 120+ Total - Past due 91 - 120+ Total Total impaired impaired but not impaired R R Rates 17,623,586 4,827,159 38,648,531 5,628,517 16,437,730 Fines 88,022,403 86,982,376 117,187,207 110,191,099 5,269,678 Total 105,645,988 91,809,535 155,835,737 115,819,616 21,707,408 Reconciliation of Impairment provision Rates receivable Balance at beginning of the year 5,628,517 4,355,559 Net movement 172,570 1,272,958 Balance at year end 5,801,087 5,628,517 Reconciliation of Impairment provision Fines receivables Balance at beginning of the year 110,191,099 144,473,080 Contributions to Provision for doubtful debt 64,013,206 73,468,280 Impairment of receivables (54,490,540) (107,750,261) Balance at year end 119,713,764 110,191,099

77 DRAKENSTEIN MUNICIPALITY NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 Restated 2019 2018 R R

20.2 Other receivables from non-exchange transactions Grants & Subsidies 35,869,613 38,400,651 Prepayments 7,078,003 6,056,479 Other receivables from non-exchange transactions 3,435,811 4,082,162 Rental Leases : Straight lining 19,767 18,516 Total Other Debtors from non-exchange transactions 46,403,195 48,557,807 The average credit period for Government Grants and Subsidies is dependent on the Government Department involved and the nature of the claim. No interest is charged on outstanding Government Grants and Subsidies. The subsidies is payable to the municipality due to allocations made in the DORA or based on agreements between the municipality and the relevant departments.

The claims instituted against the municipality's insurance company are supported by valid insurance claims which are claimable in terms of the insurance contract entered into by the municipality. The average waiting period depends on the nature of the claim. No interest is charged on outstanding insurance claims.

The average credit period for Other receivables is 30 days. No interest is charged for the first 30 days from the date of the invoice. Thereafter interest is charged at the prime rate per annum on the outstanding balance. The municipality strictly enforces its approved credit control policy to ensure the recovery of Other receivables.

The management of the municipality is of the opinion that the carrying value of Other receivables approximate their fair values.

The fair value of Other receivables was determined after considering the standard terms and conditions of agreements entered into between the municipality and National / Provincial Departments as well as Other receivables. The current payment ratio's of Other receivables were also taken into account for fair value determination.

The impairment provision was calculated after individually assessing other receivables and by calculating the historical payment ratios and assuming that future payment ratios would be similar to the historical payment ratios.

The provision for doubtful debts on other receivables exist predominantly due to the possibility that these debts will not be recovered were assessed individually for impairment.

In determining the recoverability of a receivable, the municipality considers any change in the credit quality of the receivable from the date credit was initially granted up to the reporting date. The concentration of credit risk is limited due to the customer base being large and unrelated. Accordingly, the management believe that there is no further credit provision required in excess of the Allowance for Doubtful Debts.

Reconciliation of Impairment provision Service debtors, rates debtors, other debtors and long-term receivables Balance at beginning of the year 133,317,780 111,545,397 Contributions to Provision for doubtful debt 35,336,966 57,967,251 Impairment of receivables (96,383,010) (36,194,868) Balance at 30 June 2018 72,271,736 133,317,780

Receivables from non-exchange transactions have been restated according to GRAP 3. Refer to Note 41 on "Restatement of Prior Year Figures and Adjustments" for details of the restatement.

78 DRAKENSTEIN MUNICIPALITY NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 Restated 2019 2018 R R

21. CASH AND CASH EQUIVALENTS

The Municipality has the following bank accounts: -

FNB Primary Bank Account 627-023-103-85 8,777,432 60,134,803 FNB Secondary Bank Account 627-023-123-49 0 0 FNB Traffic Fines Bank Account 620-715-265-14 0 0 FNB Motor Vehicle Licensing Bank Account 628-046-375-70 0 0 8,777,432 60,134,803 At the beginning of 2017/18, the Municipality moved over to First National Bank (FNB), but for continuity reasons still utilised the Nedbank accounts up to the end of December 2017. All account balances are cleared on a daily basis to the main account. The municipality had an overdraft facility of R5 million with Nedbank, but did not utilise it for this financial year. The municipality does not have an overdraft facility with FNB.

Bank statement balance at beginning of year 60,134,803 59,410,605 Bank statement balance at end of year 8,777,432 60,134,803 Cash book balance at beginning of year 3,969,323 12,490,584

Petty Cash / Float 26,450 24,450 Bank statement at end of year 8,777,432 60,134,803 Net movement / reconciling items (2,827,516) (56,165,480) Cash book balance at end of year 5,949,916 3,969,323 Short term investment deposits. 59,877,224 225,106,143 TOTAL CASH AND CASH EQUIVALENTS 65,853,590 229,099,916 For the purposes of the Cash Flow Statement, Bank Balances, Cash and Cash Equivalents include Cash-on- Hand, Cash in Banks and Investments less than 12 months.

The management of the municipality is of the opinion that the carrying value of Bank Balances, Cash and Cash Equivalents recorded at amortised cost in the Annual Financial Statements approximate their fair values.

The fair value of Bank Balances, Cash and Cash Equivalents was determined after considering the standard terms and conditions of agreements entered into between the municipality and financial institutions.

INSTITUTION ACCOUNT NUMBER ACCOUNT TYPE ABSA 92-9096-7912 CALL DEPOSIT 3,084,620 22,042,604 ABSA 92-9214-9948 CALL DEPOSIT 4,021,260 22,440,317 ABSA 92-9416-2871 CALL DEPOSIT 4,058,792 22,198,173 ABSA 92-9735-7532 CALL DEPOSIT 4,035,730 22,270,182 ABSA 92-9737-3681 CALL DEPOSIT 3,305,201 22,286,422 ABSA 40-9637-0104 CALL DEPOSIT 40,076,216 0 58,581,818 111,237,698 FIRST NATIONAL BANK 747-2328-2667 32 DAY CALL ACCOUNT 1,277,020 1,189,642 FIRST NATIONAL BANK 627-5905-4085 CALL DEPOSIT 0 760,303 1,277,020 1,949,945 INVESTEC 1400-020170-500 CALL DEPOSIT 18,385 0 18,385 0 STANDARD BANK 07 875 830 0 - 035 CALL DEPOSIT 0 110,238,247 STANDARD BANK 07 875 830 0 - 043 CALL DEPOSIT 0 392,591 STANDARD BANK 07 875 830 0 - 047 CALL DEPOSIT 0 1,287,663 0 111,918,501 TOTAL INVESTMENTS 59,877,224 225,106,144 FINANCING FACILITIES Unsecured Bank overdraft - Amount used 0 0 - Amount unused 0 0 0 0

79 DRAKENSTEIN MUNICIPALITY NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 Restated 2019 2018 R R

22. PROPERTY RATES Actual Residential 212,715,017 207,630,806 Agricultural 57,650,326 45,614,608 Commercial 94,894,902 70,281,830 State 25,812,412 24,250,162 Less : Income forgone rates (119,925,315) (102,260,020) Total Property Rates 271,147,343 245,517,386

Valuation as at June 2018 Residential 35,849,214,870 37,760,058,842 Agricultural 8,521,896,600 8,528,593,101 Commercial 10,580,458,972 7,175,028,200 State 2,470,077,050 2,476,904,050 Total Property Valuations 57,421,647,492 55,940,584,193 General Valuations on land and buildings are performed every four years. The last general valuation came into effect on 1 July 2017. Supplementary valuations are processed on an annual basis to take into account changes in individual property values due to alterations and subdivisions. A uniform rate for the same class and type of property was applied with the implementation of the Property Rates Act. A rate on different categories was applied to property valuations to determine assessment rates. Rebates of 50% are applied to pensioners. A discount of 20% was granted to the state institutions. Rates are levied monthly on property owners and are payable the 15th of each month for monthly rate payers of Drakenstein areas and 30th September for annual payers. Interest is levied at the prime rate on outstanding rates amounts.

23. SERVICE CHARGES

Sale of Electricity 1,045,188,765 988,802,269 Sale of Water 184,157,814 199,259,821 Waste Management (solid waste) 138,258,427 120,931,290 Waste Water Management (sewerage and sanitation) 116,246,237 101,204,564 Other 0 42,670 1,483,851,243 1,410,240,614 Less: Income forgone (151,361,578) (123,216,298) Total Service Charges 1,332,489,665 1,287,024,316

The amounts disclosed above for revenue from Service Charges are in respect of services rendered which are billed to the consumers on a monthly basis according to approved tariffs. Service charges have been restated according to GRAP 3. Refer to Note 41 on "Restatement of Prior Year Figures and Adjustments" for details of the restatement.

24. SALE OF GOODS AND RENDERING OF SERVICES Building Plan Approval 8,012,679 4,736,591 Camping Fees 2,207,847 2,012,404 Cemetery and Burial 3,142,365 2,615,652 Other revenue from the sale of goods and rendering of services 2,638,659 1,559,588 16,001,550 10,924,234

25. RENTAL FROM FIXED ASSETS

Operating Lease Rental Revenue: Land & Buildings Investment Property 1,949,782 1,485,983 Housing Rental 31,319,899 28,828,259 Other Rental Revenue 976,121 159,066 Total Rentals 34,245,803 30,473,308

26. FINANCE INCOME AND DIVIDENDS

Interest - external investments 14,208,454 22,013,037 Dividends - stock 15,120 15,120 Interest - outstanding debtors 9,574,994 17,054,921 Total Interest Receivable 23,798,567 39,083,078

80 DRAKENSTEIN MUNICIPALITY NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 Restated 2019 2018 R R

27. FINES, PENALTIES AND FORFEITS Building 5,000 8,000 Illegal Connections - Electricity 177,810 46,254 Overdue Books Fine 100,036 98,474 Pound Fees 866,585 313,067 Traffic 74,103,860 92,472,686 75,253,291 92,938,479 Fines, penalties and forfeits have been restated according to GRAP 3. Refer to Note 41 on "Restatement of Prior Year Figures and Adjustments" for details of the restatement.

28. LICENSES AND PERMITS - AGENCY FEES Included in licenses and permits is an amount of R13,537,700 (2018: R12,755,962) received from the Department of Transport and Public Works as agency fees for motor vehicle registration and licenses services, which the Municipality performs on behalf of the Department of Transport and Public Works.

29. TRANSFERS AND SUBSIDIES Grants from Operational 168,125,090 152,319,538 Grants from Capital 177,062,998 151,870,286 345,188,088 304,189,824 Unconditional grants Equitable Share 137,518,000 120,821,000 Other 4,959,501 2,014,109 Operational grants 142,477,501 122,835,109 Conditional grants 203,523,683 181,433,915 National Government 66,277,203 61,862,644 Provincial Government 137,363,775 119,571,271 Provincial Government (117,295) 0 Sub-total 346,001,184 304,269,024 Offsetting of Housing Expenditure where Municipality is seen as an agent (813,097) (79,200) Total Government Grant and Subsidies 345,188,087 304,189,824 29.1 National Government (Unconditional Grants) Balance unspent at beginning of year (0) 0 Current year (137,518,000) (120,821,000) Conditionsreceipts met - transferred to revenue 137,518,000 120,821,000 Conditions still to be met - transferred to liabilities (refer note 10) (0) (0) In terms of the Constitution, this grant is used to subsidise the provision of basic services to indigent community members. All registered indigents receive a 100% monthly subsidy for the basic charges of Electricity, Refuse Removal, Sewerage and Water Services, the subsidy is adjusted as tariffs increase. All qualifying registered indigent households receive 6 kl water and 100 kWh electricity free every month.

29.2 National Government (Conditional Grants) Balance unspent at beginning of year (10,643,587) (1,329,231) Current year receipts (56,272,943) (71,177,000) Conditions met - transferred to revenue 66,277,203 61,862,644 Conditions still to be met - transferred to liabilities (refer note 10) (639,327) (10,643,587) These grants were used to construct infrastructure assets for the Municipality. Other than the unspent amount, the conditions of the grant have been met. This grant received from National Government are for operational and capital expenditure projects related to budget reform and implementation of the MFMA . Other than the unspent amount, the conditions of the grant have been met. 29.3 Provincial Government (Conditional Grants) Balance unspent at beginning of year (39,335,163) (24,929,667) Current year receipts (124,613,909) (133,976,767) Conditions met - transferred to revenue 137,363,775 119,571,271 Conditions still to be met - transferred to liabilities (refer note 10) (26,585,297) (39,335,163) Conditions not met - repaid to grant provider 60,000 0 Conditions not met - repaid to grant provider 57,295 0 Conditions still to be met - transferred to liabilities (refer note 10) 117,295 0 These grants received from Provincial Government are for operational and capital expenditure such as Revenue from Housing Grants and the related housing operating expenditure where Drakenstein Municipality is regarded as an agent in terms of GRAP amounted to R 813,097 (2018: R 79,200). In terms of a GRAP interpretation, where a municipality is regarded as an agent, the revenue should be set off against the operating expenditure.

81 DRAKENSTEIN MUNICIPALITY NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 Restated 2019 2018 R R

29.4 Other Grants Balance unspent at beginning of year (2,783,564) (3,465,515) Current year receipts (2,209,423) (1,332,157) Conditions met - transferred to revenue 1,850,583 2,014,109 Conditions still to be met - transferred to liabilities (refer note 10) (3,142,404) (2,783,564)

These grants received from other institutions are for operational and capital expenditure projects. Other than the unspent amount, the conditions of the grant have been met. No funds have been withheld.

29.5 Guarantees and Donations Balance unspent at beginning of year (987,208) (1,065,596) Current year receipts (3,108,919) 0 Conditions met - transferred to revenue 3,108,919 78,388 Conditions still to be met - transferred to liabilities (refer note 10) (987,208) (987,208)

These grants received from other institutions are for operational and capital expenditure projects. Other than the unspent amount, the conditions of the grant have been met. No funds have been withheld.

30. OPERATIONAL REVENUE Revenue from exchange transactions Revenue from exchange transactions 9,309,022 3,695,012 Revenue from non-exchange transactions Goods and services received in kind 14,369,654 7,825,306 14,369,654 7,825,306 Services received in kind During the financial year, the municipality received the following services in kind, that was recognised in terms of GRAP 23.

The Western Cape Provincial Treasury, seconded two employees for a period of eight months during the 2018/19 financial year to the Municipality. The fair value of the services received equates to R204,348 (2018: R116,771).

Included in goods and services in kind, is an amount of R14,165,305 (2018: R7,708,536) related to interest payable on an external loan that was waived by DBSA as a grant from the IIPSAS fund was received by the DBSA (the lender). This grant covered a part of the interest payable on the loan received from the DBSA during the 2017/2018 year. In terms of GRAP 23, where lenders waive their right to collect a debt owed by an entity, revenue arising from debt forgiveness is measured at the carrying amount of the debt forgiven.

82 DRAKENSTEIN MUNICIPALITY NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 Restated 2019 2018 R R

31. EMPLOYEE RELATED COSTS

Salaries and Wages 426,570,671 374,345,318 Salaries 426,570,671 374,345,318

Other Allowances and contributions 214,229,097 169,739,733 Social contributions - UIF, pensions and medical aid etc. 91,575,497 79,982,268 Travel, motor car, accommodation, subsistence and other allowances 28,508,156 19,426,054 Housing benefits and allowances 4,861,151 5,801,043 Overtime payments 36,437,636 36,635,911 Acting Allowance 1,292,964 1,807,657 Shift Allowance 2,002,979 1,784,874 Standby Allowance 10,992,385 9,891,530 Night Shift Allowance 2,779,135 2,266,488 Cell Allowance 2,736,191 1,488,998 Workman Compensation Workman 2,935,787 2,632,679 Contribution to leave reserve 6,186,739 7,393,775 Provision for TASK backpay 22,829,121 0 Provision for performance bonuses 1,091,355 628,458

Defined Benefit Plan Expense: Post Employment Health Care 26,365,605 15,351,479 Current 3,348,000 3,440,000 Loss on actuarial valuations 10,861,605 39,479 Interest Cost 12,156,000 11,872,000

Defined Benefit Plan Expense: Ex Gratia Pension Benefits (344,592) 72,236 Gains on actuarial valuations (548,592) (151,764) Interest Cost 204,000 224,000

Defined Benefit Plan Expense: Long Service 5,184,734 8,064,814 Current Service Cost 2,826,000 2,462,000 Loss on actuarial valuations 0 2,131,814 Gains on actuarial valuations (1,540,266) 0 Interest Cost 3,899,000 3,471,000

Sub Total 672,005,515 567,573,580 Expenditure Recharged (44,918) 0 Recharged to capital projects (44,918) 0

Total Employee Related Costs 671,960,597 567,573,580

83 DRAKENSTEIN MUNICIPALITY NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019

Structured Remuneration of Executives Non‐ Total Annual Structured Re Imbursive Acting Car Performance Medical Social Cell Unpaid Group Pensionable Salary Bonus Traveling Allowance Allowance Bonus Contributions Backpay Leave Contribution Subsistence UIF Allowance Hours Insurance Allowance RRRR R RR R RRR RR RR 2019

Leibbrandt JH 2,283,621 1,516,196 0 0 0 144,000 263,981 35,187 0 0 272,915 0 1,785 30,452 0 19,104 0 (City Manager) Carstens J 1,714,904 1,229,217 0 0 0 96,000 166,643 0 0 0 221,259 0 1,785 0 0 0 0 (Chief Financial Officer ) Johaar S 1,788,488 921,626 0 0 0 0 166,643 0 0 0 165,893 0 1,785 23,313 0 11,613 497,616 (Executive Director: Corporate Services) Hattingh D 1,444,351 1,250,785 0 0 0 0 166,643 0 0 0 0 0 1,546 25,377 0 0 0 (Executive Director: Engineering Services) Boshoff GBF 398,922 251,270 47,514 0 0 10,000 80,321 0 9,371 0 0 0 446 0 0 0 0 (Executive Director: Community Services) Waring LA 1,788,488 1,302,328 0 0 0 60,000 166,643 0 0 0 234,419 0 1,785 23,313 0 0 0 (Executive Director: Planning and Development) Esau G 946,076 700,369 0 0 0 105,000 0 0 0 0 126,067 0 1,041 13,599 0 0 0 (Executive Director: Community Services) Petersen V 000012,186 00 0000000000 (Acting Executive Director: Community Services) Saayman E 000045,900 00 0000000000 (Acting Executive Director: Community Services) 10,364,849 7,171,791 47,514 0 58,085 415,000 1,010,876 35,187 9,371 0 1,020,552 0 10,172 116,053 ‐ 30,717 497,616

84 DRAKENSTEIN MUNICIPALITY NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019

Structured Non‐ Total Annual Structured Re Imbursive Acting Car Performance Medical Social Cell Unpaid Group Pensionable Remuneration of Executives Salary Bonus Traveling Allowance Allowance Bonus Contributions Backpay Leave Contribution Subsistence UIF Allowance Hours Insurance Allowance RRRR R RR R RRR RRRRR 2018

Leibbrandt JH 1,968,655 1,221,770 0 2,674 0 144,000 50,726 51,899 203,374 0 246,581 0 1,785 30,452 0 15,394 0 (City Manager) Carstens J 1,667,579 1,008,486 0 0 0 97,874 147,698 46,452 154,640 0 209,363 1,282 1,7850000 (Chief Financial Officer ) Johaar S 1,538,129 701,596 0 0 0 0 0 0 151,434 0 153,545 0 1,785 23,313 0 8,840 497,616 (Executive Director: Corporate Services) Hattingh D 1,552,254 1,334,339 0 0 0 0 0 0 180,601 0 0 0 1,786 35,528 0 0 0 (Executive Director: Engineering Services) Boshoff GBF 1,683,438 1,518,891 0 0 0 60,000 74,815 0 27,532 0 0 416 1,785 0 0 0 0 (Executive Director: Community Services) Waring LA 1,640,944 1,233,000 0 0 0 60,000 114,443 0 0 0 221,940 0 1,785 27,198 (17,422) 0 0 (Executive Director: Planning and Development) Delany D 9,9290009,92900 0000000000 (Acting Executive Director: Planning and Development) Keketsi N 6,8730006,873 00 0000000000 (Acting Chief Financial Officer)

10,067,801 7,018,081 0 2,674 16,802 361,874 387,681 98,351 717,581 0 831,429 1,698 10,709 116,491 (17,422) 24,234 497,616

The Remuneration of Executives as disclosed above refer to the actual amounts paid to them during the 2018/19 and 2017/18 years respectively. Where other officials acted in the Executive Director positions and was remunerated accordingly, only the additional remuneration for acting in that position is disclosed.

85 DRAKENSTEIN MUNICIPALITY NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 Restated 2019 2018 R R

32. COUNCILLOR RELATED COSTS

Executive Mayor (Poole CJ) 1,051,128 1,000,408 Deputy Executive Mayor (Combrink GC) 849,782 811,966 Speaker (Stowman AC) 849,782 806,806 Chief Whip (Koegelenberg RA) 799,445 757,007 Mayoral Committee Members 8,350,291 7,553,556 Councillors 18,044,760 17,132,423 Total Councillors Remuneration 29,945,188 28,062,166

In Kind Benefits The Executive Mayor, Deputy Executive Mayor, Speaker, and Mayoral Committee members are employed full-time. Each is provided with an office, administrative and secretarial support at the cost of the Council. The Executive Mayor and Deputy Mayor and other full-time Mayoral Committee members have access to Council owned vehicles for ceremonial and official functions. Councillors receive the benefit of special risk insurance cover (SASRIA) as provided for in terms of the upper limits of the salaries, allowances and benefits of the different members of municipal councils, as determined by the Minister of Cooperative Governance and Traditional Affairs in accordance with the Remuneration of Public Office Bearers Act, 1998. This insurance cover, should cover the loss of or damage to a councillor's personal immovable or moveable property and assets, excluding property used by such councillor for business purposes, as well as life and disability cover, for any loss or damage caused by riot, civil unrest, strike or public disorder.

33. IMPAIRMENT LOSSES ON FINANCIAL ASSETS

Bad Debts Contribution to Impairment Provision 105,608,249 128,105,610 Contribution from Impairment Provision (150,873,550) (130,107,191) Bad Debts Written-off 150,873,550 130,636,579 105,608,249 128,634,998

34. DEPRECIATION AND AMORTISATION

Depreciation: Property, Plant and Equipment Depreciation and Amortisation 209,749,693 194,281,084 Amortisation: Intangible Assets 874,670 1,471,423 Total Depreciation and Amortisation 210,624,362 195,752,508 Depreciation and amortisation have been restated according to GRAP 3. Refer to Note 41 on "Prior Period Adjustments" for details of the restatement.

35. IMPAIRMENT LOSSES ON PPE, IA AND HA

Impairment Losses on Fixed Assets Recognised: 1,006,785 27,983,597 Property, Plant and Equipment 1,006,785 27,099,010 Intangible Assets 0 884,587 Total Impairment Losses 1,006,785 27,983,597 Impairment losses includes an amount totalling R0 (2018: R23,342,976), which is due to the revaluation of land and buildings during 2017/18. In terms of GRAP 17, if the carrying amount of an asset is decreased as a result of a revaluation, the decrease shall be recognised in surplus or deficit, to the extent that there is not a credit balance existing in the revaluation surplus in respect of that asset.

86 DRAKENSTEIN MUNICIPALITY NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 Restated 2019 2018 R R

36. INTEREST PAID

Long-term Liabilities 143,899,762 124,284,561 Finance Leases 321,219 456,615 Interest on External Borrowings - exchange transactions 144,220,981 124,741,177 Interest on long-term laibilities - non-exchange transaction 14,165,305 7,708,536 Total Interest on external borrowings 158,386,286 132,449,712 The weighted average capitalisation rate on funds borrowed generally is 10.30% per annum (2018: 9.80% per annum). The interest on long-term liabilities - non-exchange transaction, refers to interest to an amount of R14,168,216 (2018: R7,708,536) that was waived by DBSA as a grant from the IIPSAS fund was received by the DBSA (the lender), this grant covered a part of the interest payable on the loan received from the DBSA during the 2018/2019 year. In terms of GRAP 23, where lenders waive their right to collect a debt owed by an entity, revenue arising from debt forgiveness is measured at the carrying amount of the debt forgiven. For purposes of ratio analysis where interest is used, this line-item is to be disregarded as the physical payment of the interest was not done.

37. BULK PURCHASES

Electricity 673,707,616 632,000,521 Water 4,306,442 2,738,869 Total Bulk Purchases 678,014,058 634,739,390 Bulk Purchases are the cost of commodities not generated by the municipality, which the municipality distributes in the municipal area for resale to the consumers. Electricity is purchased from Eskom whilst water is purchased from the City of Cape Town.

38. CONTRACTED SERVICES Consultants and Professional Services Business and Advisory 23,962,855 25,049,147 Legal Cost 4,962,449 4,466,240 Other Consultants and professional services 941,259 348,421 Contractors Catering Services 991,016 1,800,048 Housing Project Expenditure 4,011,414 5,326,162 Maintenance of Buildings and Facilities 13,492,952 6,957,072 Maintenance of Equipment 21,164,492 20,924,000 MaintenanceMaintenance of Unspecified of Infrastructure Assets and other assets 29,044,140 61,178,155 Safeguard and Security 33,543,684 23,805,740 Other contractors services 9,098,928 4,151,607 Outsourced Services Traffic Fines Management 2,538,728 3,022,284 Other outsourced services 2,833,563 877,271 146,585,479 157,906,148 39. OPERATIONAL COST

Advertising, Publicity and Marketing 5,118,769 6,168,547 Bank Charges, Facility and Card Fees 4,862,752 5,156,413 Commission 9,238,766 8,744,199 Communication 7,184,586 7,216,850 External Audit Fees 7,435,898 6,614,280 External Computer Service 6,676,476 8,377,588 Insurance Underwriting 7,403,125 4,596,180 Printing, Publications and Books Printing. Publications and Books 2,500,153 2,258,673 Professional Bodies, Membership and Subscription 6,262,545 5,747,569 Provision for the rehabilitation of landfill 3,936,857 15,710,432 Remuneration to Ward Committees 870,775 695,863 Skills Development Fund Levy 5,180,039 4,680,683 Uniform and Protective Clothing 2,579,942 2,388,845 Other Operational Expenditure 5,606,388 5,075,492 74,857,071 83,431,614

Operational cost have been restated according to GRAP 3. Refer to Note 41 on "Restatement of Prior Year Figures and Adjustments" for details of the restatement.

87 DRAKENSTEIN MUNICIPALITY NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 Restated 2019 2018 R R

40. CASH GENERATED BY OPERATIONS Surplus/(Deficit) for the year (43,793,258) (30,834,957) Adjustment for :- 163,694,322 208,391,313 - Depreciation and amortisation 210,624,362 195,752,508 - Housing Development Fund (672,469) (202,428) - Provision for landfill rehab - iGRAP2 adjustment (13,866,380) (15,609,813) - Impairment Losses 1,006,785 27,983,597 - Fair Value adjustments (1,950,000) (3,740,000) - Assets from capital grant in-kind (26,902,575) (19,811,958) - Gain on assets from non exchange transactions (39,911) (291,000) - Fair Value adjustments on Listed stock 3,795 4,228 - (Gain)/Losses on disposal of property, plant and equipment (4,509,285) 24,306,180

Operating surplus before working capital changes: 119,901,064 177,556,356 (Increase)/Decrease in inventories (1,529,085) 714,352 (Increase)/Decrease in receivables from exchange transactions (27,242,947) (43,699,846) (Increase)/Decrease in Long Term Receivables 178,930 (8,872) Decrease /(Increase) in receivables from non-exchange transactions 6,535,451 (18,007,101) Decrease /(Increase) in Post retirement benefits and Long services 46,817,317 19,056,351 (Decrease/Increase in other provisions 17,784,025 21,632,905 (Decrease)/Increase in unspent conditional grants and receipts (22,395,287) 22,959,513 Increase/(Decrease) in creditors 47,409,866 102,065,237 Decrease/(Increase) in VAT(net) 52,472,054 (9,810,835) Cash generated by operations 239,931,387 272,458,060

Cash Generated by operations have been restated according to GRAP 3. Refer to Note 41 on "Restatement of Prior Year Figures and Adjustments" for details of the restatement.

41. RESTATEMENT OF PRIOR YEAR FIGURES AND ADJUSTMENTS

The following restatements and adjustments occurred which are set out below: a) Reclassifications PREVIOUSLY RECLAS- RECLASSIFIED i) Adjustment of statement of financial performance items REPORTED SIFICATION AMOUNT

REVENUE Revenue from exchange transactions Service charges 1,292,300,481 0 1,292,300,481 Sale of Goods and Rendering of Services 10,924,234 0 10,924,234 Rental from Fixed Assets RENTAL FROM FIXED ASSETS 30,473,307 0 30,473,307 Finance Income and Dividends 38,719,750 0 38,719,750 Operational Revenue (exchange) 3,695,012 0 3,695,012 Licences and permits 17,329,103 0 17,329,103

Revenue from non-exchange transactions Property Rates 245,517,386 0 245,517,386 Surcharges and Taxes 1,453,967 0 1,453,967 Fines, Penalties and Forfeits 92,938,480 0 92,938,480 Transfers and Subsidies 308,004,189 0 308,004,189 Operational revenue ( non - exchange) 7,825,306 0 7,825,306 Total Revenue 2,049,181,215 0 2,049,181,215

EXPENDITURE Employee Related Costs 567,468,315 0 567,468,315 Councillor related costs 28,062,166 0 28,062,166 Depreciation and Amortisation 186,526,978 0 186,526,978 Operating Leases 17,135,209 13,430,277 30,565,486 Interest paid 132,449,712 0 132,449,712 Bulk purchases : water 2,738,869 0 2,738,869 Bulk purchases : Electricity 632,000,521 0 632,000,521 Contracted services 180,568,754 (28,295,223) 152,273,531 Inventory 38,322,172 14,863,593 53,185,765 Transfers and subsidies : operational 10,531,922 0 10,531,922 Operational cost 82,731,216 1,353 82,732,569 Total Expenditure 1,878,535,834 (0) 1,878,535,834

88 DRAKENSTEIN MUNICIPALITY NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 Restated 2019 2018 R R

GAINS AND LOSSES Impairment losses on financial assets 128,634,998 0 128,634,998 Impairment losses on PPE, IA, & HA 27,983,597 0 27,983,597 Gains /(losses) on disposal of PPE, IA, & HA 11,311,420 0 11,311,420 Fair value adjustments Financial Assets 4,228 0 4,228 Fair value adjustments Investment Property (3,740,000) 0 (3,740,000) Gains/(losses) on Inventory (22,350) 0 (22,350) Gains from assets from non-exchange transactions (291,000) 0 (291,000) 163,880,893 0 163,880,893 Surplus / (Deficit) from continued operations 6,764,488 0 6,764,488

PREVIOUSLY RECLAS- RECLASSIFIED ii) Adjustment of statement of financial position REPORTED SIFICATION AMOUNT ASSETS

Non-current assets 5,874,329,753 (2,944,270) 5,871,385,482 Property, plant and equipment 5,782,370,804 (2,944,270) 5,779,426,534 Heritage assets 41,223,700 0 41,223,700 Intangible assets 4,960,456 0 4,960,456 Investment property 44,390,000 0 44,390,000 Non-current assets classified as held for sale 0 0 0 Non-current investments 128,762 0 128,762 Non-current receivables from exchange transactions 1,256,030 0 1,256,030

Current assets 643,243,173 4,820,042 648,063,215 Inventory 21,664,791 2,944,270 24,609,061 Trade and other receivables from exchange transactions 253,463,027 3,248,109 256,711,136 Receivables from non-exchange transactions 90,209,102 (1,372,337) 88,836,765 Current portion of long-term receivables 329,048 0 329,048 Cash and cash equivalents 229,099,916 0 229,099,916 VAT receivable 48,477,288 0 48,477,288

Total Assets 6,517,572,926 1,875,772 6,519,448,697

NET ASSETS AND LIABILITIES

Non-current liabilities 1,655,409,655 0 1,655,409,655 Borrowings 1,333,295,041 0 1,333,295,041 Non-current defined benefit obligations 119,214,000 (119,214,000) 0 Non-current provisions 201,662,002 (35,846,000) 165,816,002 Non-current employee benefits 0 155,060,000 155,060,000 Non-current finance lease liabilities 1,238,612 0 1,238,612

Current liabilities 679,423,412 1,875,771 681,299,183 Consumer deposits 39,819,252 5,003,122 44,822,374 Trade and other payables from exchange transactions 352,841,277 (14,533,544) 338,307,733 Unspent conditional grants and receipts 84,051,261 (22,971,644) 61,079,617 Current portion of non-current borrowings 171,335,664 0 171,335,664 Current portion of finance lease liabilities 3,488,114 0 3,488,114 Current portion of defined benefit obligations 7,786,000 (7,786,000) 0 Current portion of employee benefits 0 62,265,681 62,265,681 Current provisions 20,101,844 (20,101,844) 0

Total Net Assets 4,182,739,859 0 4,182,739,859 Housing development fund 1,617,859,741 0 1,617,859,741 Reserves and funds 20,527,483 0 20,527,483 Accumulated surplus / (deficit) 2,544,352,635 0 2,544,352,635

Total Net Assets and Liabilities 6,517,572,926 1,875,771 6,519,448,697

89 DRAKENSTEIN MUNICIPALITY NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 Restated 2019 2018 R R

PREVIOUSLY RECLAS- RECLASSIFIED iii) Adjustment of cash flow statement REPORTED SIFICATION AMOUNT CASH FLOW FROM OPERATING ACTIVITIES RECEIPTS Property Rates 241,880,363 0 241,880,363 Sale of goods and services 1,148,134,978 (158,939) 1,147,976,039 Grants received 317,827,859 (10,490,481) 307,337,378 Interest received 38,704,630 0 38,704,630 Dividends received 15,120 0 15,120 Other receipts and fines received 109,511,915 0 109,511,915

PAYMENTS Employee cost (589,309,710) 12,952,351 (576,357,359) Suppliers (853,031,572) (3,705,591) (856,737,163) Interest paid (124,741,177) 0 (124,741,177) VAT paid (9,816,297) 0 (9,816,297) NET CASH FROM OPERATING ACTIVITIES 279,176,109 (1,402,660) 277,773,449

CASH FLOWS FROM INVESTING ACTIVITIES

Purchase of property, plant and equipment and intangible assets (657,160,116) 0 (657,160,116) Purchase of Intangible assets 0 0 0 Purchase of Investment property 0 0 0 Proceeds on disposal of property, plant and equipment 0 0 0 Decrease/(Increase) in non-current receivables 911,165 0 911,165 Decrease/(Increase) in call investment deposits 0 0 0 (Decrease)/Increase in non current investment 0 0 0

NET CASH FROM INVESTING ACTIVITIES (656,248,951) 0 (656,248,951)

CASH FLOWS FROM FINANCING ACTIVITIES

(Decrease) / Increase in long-term liabilities 314,142,342 0 314,142,342 Increase in consumer deposits 2,012,399 1,402,659 3,415,058 Increase/(Decrease) in Financial Lease Liability 737,495 0 737,495 NET CASH FROM FINANCING ACTIVITIES 316,892,236 1,402,659 318,294,895 NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS (60,180,606) 0 (60,180,606) Cash and cash equivalents at the beginning of the year 289,280,521 0 289,280,521 Cash and cash equivalents at the end of the year 229,099,915#REF! 0 229,099,915

iv) Detail notes affected by the reclassification Total of change a) RECLASSIFICATION OF EMPLOYEE BENEFITS in 2018 During the year the classifications of items on the Statement of Financial Performance was reviewed and reclassified as to group employee related laibilities together.

(Increase) / decrease in Trade and other payables from exchange transactions 34,377,837 Staff leave provision 34,377,837

(Increase) / decrease in Non-current Provisions 35,846,000 Long service awards 35,846,000

(Increase) / decrease in Current Provisions 20,101,844 Long service awards 3,440,000 Provision for bonusses 15,233,132 Provision for performance bonusses 1,428,712

(Increase) / decrease in Non-current Post employment benefits 119,214,000 Post Employment Health Care Benefits 116,917,000 Ex-Gratia Pension Benefits 2,297,000

(Increase) / decrease in Current Post employment benefits 7,786,000 Post Employment Health Care Benefits 7,568,000 Ex-Gratia Pension Benefits 218,000

90 DRAKENSTEIN MUNICIPALITY NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 Restated 2019 2018 R R

(Increase) / decrease in Non-current Employee benefits (155,060,000) Post Employment Health Care Benefits (116,917,000) Ex-Gratia Pension Benefits (2,297,000) Long service awards (35,846,000)

(Increase) / decrease in Current Employee benefits (62,265,681) Post Employment Health Care Benefits (7,568,000) Ex-Gratia Pension Benefits (218,000) Long service awards (3,440,000) Provision for bonusses (15,233,132) Provision for performance bonusses (1,428,712) Staff leave provision (34,377,837)

Total of change b) RECLASSIFICATION OF CONTRACTED SERVICES, INVENTORY, OPERATIONAL COST AND OPERATING LEASES in 2018 During the year the classifications of items on the Statement of Financial Performance was reviewed and reclassified as errors were noted in the classifications of individual transactions .

(Decrease) / increase in Inventory 14,863,593

(Decrease) / increase in Operating leases 13,430,277

(Decrease) / increase in Contracted Services (28,295,223) Business and Advisory (3,604,948) Infrastructure and Planning (17,605,405) Catering Services 499,590 Maintenance of Buildings and Facilities (3,768,554) Maintenance of Equipment (726,936) Maintenance of Infrastructure and other assets (unspecified assets) 7,283,304 Safeguard and Security (16,811) Other contractors services (5,848,199) Other outsourced services (4,507,264)

(Decrease) / increase in Operational cost 1,353 Advertising, Publicity and Marketing 16,410 Printing. Publications and Books (7,100) Uniform and Protective Clothing (6,863) Other Operational Expenditure (1,094)

c) RECLASSIFICATION OF TRADE AND OTHER RECEIVABLES FROM EXCHANGE TRANSACTIONS, RECEIVABLES FROM NON- Total of change EXCHANGE TRANSACTIONS AND TRADE AND OTHER PAYABLES FROM EXCHANGE TRANSACTIONS in 2018 During the year the classifications of items on the Statement of Financial Position was reviewed and reclassified as errors were noted in the classification.

Increase / (decrease) Receivables from non-exchange transactions (1,372,338) Recoverable Debtors (11,874,306) Other receivables from non-exchange transactions 4,445,489 Prepayments 6,056,479

(Increase) / decrease in Trade and other payables from exchange transactions (6,878,893) Other Creditors (6,878,893)

(Increase) / decrease in Consumer Deposits 5,003,122 Consumer deposits 5,003,122

Increase / (decrease) in Trade and other receivables from exchange transactions 3,248,109 Recoverable Loans (729,427) Sporting Bodies (66) Sundries (18,838,441) Other receivables from exchange transactions 5,063,962 Sundry debtors 17,752,080

91 DRAKENSTEIN MUNICIPALITY NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 Restated 2019 2018 R R

d) CHANGE IN ACCOUNTING POLICY: CLASSIFICATION OF LAND TO BE USED FOR BNG HOUSING AS INVENTORY In aligning the accounting policy with the housing guideline, the portions of land identified to be utilised for BNG housing projects arereclassified as Inventory.

(Decrease) / Increase in PPE (2,944,215)

(Decrease) / Increase in Inventory 2,944,215

e) RECLASSIFICATION OF UNSPENT CONDITIONS GRANTS TO TRADE PAYABLES During the year Guarantees and donations were reclassified to Trade and other payables from exchange transactions. After a review of the accounts, management decided to disclose it under Trade and other payables. (Decrease) / Increase in Unspent Conditional Grants (22,971,644)

Increase / (Decrease) in Trade and other payables from exchange transactions 22,971,644 Payments Received in Advance

b) Prior Period Adjustments RECLASSIFIED RESTATED ADJUSTMENTS i) Adjustment of statement of financial performance items AMOUNTS AMOUNT

REVENUE

Revenue from exchange transactions Service charges 1,292,300,481 (5,276,165) 1,287,024,316 Sale of Goods and Rendering of Services 10,924,234 0 10,924,234 Rental from Fixed Assets RENTAL FROM FIXED ASSETS 30,473,307 0 30,473,307 Finance Income and Dividends 38,719,750 363,328 39,083,078 Operational Revenue (exchange) 3,695,012 0 3,695,012 Licences and permits 17,329,103 0 17,329,103

Revenue from non-exchange transactions Property rates 245,517,386 0 245,517,386 Surcharges and Taxes 1,453,967 0 1,453,967 Fines, Penalties and Forfeits 92,938,480 0 92,938,480 Transfers and Subsidies 308,004,189 (3,814,366) 304,189,823 Operational revenue ( non - exchange) 7,825,306 0 7,825,306

Total Revenue 2,049,181,217 (8,727,203) 2,040,454,012

EXPENDITURE

Employee Related Costs 567,468,315 105,266 567,573,581 Councillor related costs 28,062,166 0 28,062,166 Depreciation and Amortisation 186,526,978 9,225,529 195,752,507 Operating Leases 30,565,486 115,886 30,681,372 Interest paid 132,449,712 0 132,449,712 Bulk purchases : Water 2,738,869 0 2,738,869 Bulk purchases : Electricity 632,000,521 0 632,000,521 Contracted services 152,273,531 5,632,616 157,906,148 Inventory 53,185,765 99,141 53,284,906 Transfers and subsidies : operational expenditure 10,531,922 0 10,531,922 Operational cost 82,732,569 699,045 83,431,614 Total Expenditure 1,878,535,834 15,877,483 1,894,413,317

GAINS AND LOSSES Impairment losses on financial assets 128,634,998 0 128,634,998 Impairment losses on PPE, IA, & HA 27,983,597 0 27,983,597 Gains /(losses) on disposal of PPE, IA, & HA 11,311,420 12,994,760 24,306,180 Fair value adjustments Financial Assets 4,228 0 4,228 Fair value adjustments Investment Property (3,740,000) 0 (3,740,000) Gains/(losses) on Inventory (22,350) 0 (22,350) Gains from assets from non-exchange transactions (291,000) 0 (291,000) 163,880,893 12,994,760 176,875,653

Surplus / (Deficit) from continued operations 6,764,489 (37,599,446) (30,834,959)

92 DRAKENSTEIN MUNICIPALITY NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 Restated 2019 2018 R R

RECLASSIFIED RESTATED ADJUSTMENTS (ii) Adjustment of opening balances AMOUNTS AMOUNT NET ASSETS Accumulated Surplus 1 July 2017 2,501,877,482 443,928 2,502,321,410 Adjustment to Unspent Conditional Grants 7,330,093 Adjustment to debtor due to water adjustment (2,965,543) Adjustment to receivables from non-exchange transactions (262,836) Adjustment to retention 14,842,585 Adjustment to Intangible assets 350,741 Adjustment to payables 8,666,111 Adjustment to Property, plant and equipment (26,904,787) Adjustment to Standby allowance (612,436)

Revaluation Reserve 1 July 2017 1,233,155,247 (46,544,943) 1,186,610,304 Adjustment to Property, plant and equipment (46,544,943) RECLASSIFIED RESTATED ADJUSTMENTS AMOUNTS AMOUNT ASSETS AND LIABILITIES Unspent conditional grants and receipts (Opening Balance 1 July 2017) (50,604,266) 7,330,093 (43,274,173) Trade and other receivables from exchange transaction (Opening Balance 1 July 2017) 206,388,360 (2,965,543) 203,422,817 Receivables from non-exchange transaction (Opening Balance 1 July 2017) 70,822,925 (262,836) 70,560,089 Property, plant and equipment (Opening Balance 1 July 2017) 4,905,285,710 (73,449,731) 4,831,835,979 Intangible assets (Opening Balance 1 July 2017) 6,464,251 350,740 6,814,991

Trade and other payables from exchange transactions (Opening Balance 1 July 2017) (256,137,590) 22,896,260 (233,241,330) (iii) Adjustment of statement of financial position items ASSETS Non-current assets 5,871,385,482 (125,517,867) 5,745,867,615 Property, plant and equipment 5,779,426,534 (125,785,088) 5,653,641,446 Heritage assets 41,223,700 0 41,223,700 Intangible assets 4,960,456 267,221 5,227,677 Investment property 44,390,000 0 44,390,000 Non-current investments 128,762 0 128,762 Non-current receivables from exchange transactions 1,256,030 0 1,256,030 Current assets 648,063,215 (8,068,101) 639,995,114 Inventory 24,609,061 78,577 24,687,638 Trade and other receivables from exchange transactions 256,711,136 (7,878,380) 248,832,756 Receivables from non-exchange transactions 88,836,765 (262,836) 88,573,929 Current portion of long-term receivables 329,048 0 329,048 Cash and cash equivalents 229,099,916 0 229,099,916 VAT receivable 48,477,288 (5,462) 48,471,826 Total Assets 6,519,448,697 (133,585,968) 6,385,862,729 NET ASSETS AND LIABILITIES Non-current liabilities 1,655,409,655 0 1,655,409,655 Borrowings 1,333,295,041 0 1,333,295,041 Non-current provisions 165,816,002 0 165,816,002 Non-current employee benefits 155,060,000 0 155,060,000 Non-current finance lease liability 1,238,612 0 1,238,612 Current liabilities 681,299,183 (29,113,404) 652,185,779 Consumer deposits 44,822,374 0 44,822,374 Trade and other payables from exchange transactions 338,307,733 (21,486,581) 316,821,152 Unspent conditional grants and receipts 61,079,617 (7,330,093) 53,749,523 Current portion of non-current borrowings 171,335,664 0 171,335,664 Current portion of finance lease liabilities 3,488,114 (296,730) 3,191,385 Current portion of employee benefits 62,265,681 0 62,265,681 Current provisions 0 0 0 Total Net Assets 4,182,739,858 (104,472,564) 4,078,267,294 Reserves and funds 1,617,859,741 (69,775,319) 1,548,084,422 Housing development fund 20,527,483 0 20,527,483 Accumulated surplus / (deficit) 2,544,352,634 (34,697,245) 2,509,655,389 Total Net Assets and Liabilities 6,519,448,696 (133,585,968) 6,385,862,728

93 DRAKENSTEIN MUNICIPALITY NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 Restated 2019 2018 R R

RECLASSIFIED RESTATED ADJUSTMENTS iii) Adjustment of cash flow statement AMOUNTS AMOUNT CASH FLOW FROM OPERATING ACTIVITIES RECEIPTS Property rates 241,880,363 0 241,880,363 Sale of goods and services 1,147,976,039 (363,328) 1,147,612,711 Grants received 307,337,378 0 307,337,378 Interest received 38,704,630 363,328 39,067,958 Dividends received 15,120 0 15,120 Other receipts and fines received 109,511,915 0 109,511,915

PAYMENTS Employee cost (576,357,359) 0 (576,357,359) Suppliers (856,737,163) (5,320,854) (862,058,017) Interest paid (124,741,177) 0 (124,741,177) VAT paid (9,816,297) 5,462 (9,810,835) NET CASH FROM OPERATING ACTIVITIES 277,773,449 (5,315,392) 272,458,057

CASH FLOWS FROM INVESTING ACTIVITIES

Purchase of property, plant and equipment and intangible assets (657,160,116) 5,438,902 (651,721,214) Proceeds on disposal of property, plant and equipment 0 173,220 173,220 Decrease/(Increase) in non-current receivables 911,165 0 911,165 NET CASH FROM INVESTING ACTIVITIES (656,248,951) 5,612,122 (650,636,829)

CASH FLOWS FROM FINANCING ACTIVITIES

(Decrease) / Increase in long-term liabilities 314,142,342 0 314,142,342 Increase in consumer deposits 3,415,058 0 3,415,058 Increase/(Decrease) in Financial Lease Liability 737,495 (296,730) 440,765 NET CASH FROM FINANCING ACTIVITIES 318,294,895 (296,730) 317,998,165 NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS (60,180,606) 0 (60,180,607) Cash and cash equivalents at the beginning of the year 289,280,521 0 289,280,521 Cash and cash equivalents at the end of the year 229,099,9150 0 229,099,915

(iv) Detail of individual items adjusted Total of change a) INCORRECT ACCRUED FOR INTEREST RECEIVED in 2018 During the year it was discovered that interest were not accrued for in the previous financial year. This was corrected accordingly.

(Increase) / decrease in Finance Income and Dividends (363,328) Interest earned - external investments (363,328)

Increase / (decrease) in Trade and other receivables from exchange transactions 363,328 Other receivables from exchange transactions 363,328

Total of change b) CORRECTION OF INVOICE PAYMENTS in 2018 During the year it was discovered that invoices dated in 2017/18 were incorrectly paid in the 2018/19 financial year and other were cancelled. These were corrected accordingly.

Increase / (decrease) in Operating Leases 115,886 Operating leases 115,886

Increase / (decrease) in Inventory Expenses 177,718 Invenotry Expenses 177,718

94 DRAKENSTEIN MUNICIPALITY NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 Restated 2019 2018 R R

Increase / (decrease) in Operating Cost 683,565 Advertising, Publicity and Marketing 35,061 Communication 254,718 External Computer Service 391,605 Insurance Underwriting 474 Printing. Publications and Books 1,708

Increase / (decrease) in Contracted Services 505,924 Business and Advisory 219,608 Catering Services 12,500 Infrastructure and Planning 24,759 Maintenance of Buildings and Facilities 21,429 Maintenance of Equipment 45,878 Safeguard and Security 181,750

(Increase) / decrease in Trade and other payables from exchange transactions (1,477,632) Trade Creditors (1,519,503) Sundry Creditors 41,872

(Increase) / decrease in VAT receivable (5,462)

Total of change c) CORRECTION OF FINANCE LEASE LIABILITY in 2018 During the year it was discovered that a payment towards the finance lease laibility was prepaid in the previous year. The error was subsequently corrected.

(Decrease) / increase in Contracted Services (296,730) Maintenance of Buildings and Facilities (296,730)

Decrease / (increase) in Non-current finance lease liability 296,730 Finance Leases 296,730

Total of change d) CORRECTION OF UNSPENT CONDITIONAL GRANTS in 2018 During the year it was discovered that unspent conditional grant previously state as still being owed to parties should have been recognised as income prior to 1 July 2017. This was corrected accordingly.

(Increase) / decrease in Accumulated Surplus 7,330,093

(Decrease) / increase in Unspent conditional grants and receipts (7,330,093)

Total of change e) WATER DEBTOR ADJUSTMENT in 2018 During the year a debtor's water account has been adjusted and the results are that prior year levies were affected. This was corrected accordingly.

Decrease / (increase) in Accumulated Surplus (Opening Balance 1 July 2017) 2,965,543

(Decrease) / increase in Trade and other receivables from exchange transactions (Opening Balance 1 July 2017) (2,965,543)

Decrease / (increase) in Service charges 5,276,165 Water 5,276,165

(Decrease) / increase in Trade and other receivables from exchange transactions (5,276,165) Water (5,276,165)

95 DRAKENSTEIN MUNICIPALITY NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 Restated 2019 2018 R R

Total of change f) CORRECTION OF TRAFFIC FINES NOT PREVIOUSLY WITHDRAWN in 2018 During the year it was discovered that traffic fines were withdrawn in the prior year, but the system provider had not effected the process due to a system error. The error was subsequently corrected.

(Decrease) / increase in Receivables from non-exchange transactions (Opening Balance 1 July 2017) - Traffic fines debtors (2,996,235) Provision for doubtful fines 2,996,235

(Decrease) / increase in Receivables from non-exchange transactions - Traffic fines debtors (13,308,550) Provision for doubtful fines 13,308,550

Total of change g) PROPERTY, PLANT AND EQUIPMENT AND INTANGIBLE ASSETS CORRRECTIONS DONE FOR THE YEAR in 2018 During the year several errors on PPE and Intangible assets were corrected retrospectively. These corrections resulted mainly from reviewing of Work-in Progress which had been completed in prior periods and/or related to maintenance and not capital expenditure, the removal of properties which were not controlled by the municipality, as well as software programs which were not in use anymore.

Decrease / (increase) in Accumulated Surplus (Opening Balance 1 July 2017) 26,554,047

(Decrease) / Increase in PPE (Opening Balance 1 July 2017) (73,449,731)

Increase / (decrease) in Intangibles (Opening Balance 1 July 2017) 350,740

Decrease / (increase) in Revaluation reserve (Opening Balance 1 July) 46,544,943

(Increase) / decrease in Transfers and subsidies 3,814,366 Transfers and Subsidies 3,814,366

Increase / (decrease) in Depreciation and Amortisation 9,225,529 Depreciation and Amortisation 9,225,529

Increase / (decrease) in Contracted services 5,423,422 Water Supply 1,084,952 Road Transport 208,690 Electricy 3,367,648 Sanitation 700,000 Maintenance of Buildings and Facilities 62,132

Increase / (decrease) in Operational cost 15,480 External Computer Services 15,480

Decrease / (increase) in Gains/(Losses) on disposal of PPE, IA, IP & HA 13,167,980 Gains/(Losses) on disposal of PPE, IA, IP & HA 13,167,980

(Decrease) / increase in Property, Plant and Equipment (52,335,357) Property, Plant and Equipment (52,335,357)

Decrease / (increase) in Intangibles (83,519) Intangible assets (83,519)

Decrease / (increase) in Revaluation Reserve 23,230,377 Revaluation Reserve 23,230,377

Decrease / (increase) in Accumulated Surplus (2,458,277)

96 DRAKENSTEIN MUNICIPALITY NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 Restated 2019 2018 R R

Total of change h) CORRECTION OF SALE OF PPE in 2018 During the year it was discovered that the amount received on the sale of certain PPE was not recognised as revenue although ownership has passed to the seller. This was corrected accordingly.

(Increase) / decrease in Accumulated Surplus (Opening balance 1 July 2017) (8,666,111)

(Increase) / decrease in Trade and other payables from exchange transactions (Opening balance 1 July 2017) 8,666,111 Payments received in advance 8,666,111

Decrease / (increase) in Gains/(Losses) on disposal of PPE, IA, IP & HA (173,220) Gains/(Losses) on disposal of PPE, IA, IP & HA (173,220)

(Increase) / decrease in Trade and other payables from exchange transactions 173,220 Payments received in advance 173,220

i) Repairs and Maintenance PREVIOUSLY RESTATED REPORTED AMOUNT

Repairs and Maintenance, as disclosed for PPE in Note 11 (Property, plant and equipment), has been 254,195,671 277,143,635 restated as incorrect classifcations of transactions were noted.

Total of change j) INCORRECT RECEIVABLES in 2018 During the year it was discovered that receiveables were incorrect in prior years. The error has been corrected

(Increase) / decrease in Accumulated Surplus (Opening balance 1 July 2017) 262,836

(Decrease) / increase in Receivables from non-exchange transactions (Opening Balance 1 July 2017) (262,836) (262,836)

Total of change k) CORRECTION OF RETENTION in 2018 Allocation of retention identified and corrected for all completed maintenance related projects.

(Increase) / decrease in Accumulated Surplus (Opening balance 1 July 2017) (14,842,585)

(Increase) / decrease in Trade and other payables from exchange transactions (Opening Balance 1 July 2017) 14,842,585

Total of change l) CORRECTION OF INVENTORY in 2018 During the year while reconciling the stores it was discovered that transactions were incorrectly integrated on the accouting system.

Increase / (decrease) in Inventory Expenses (78,577) Invenotry Expenses (78,577)

Increase / (decrease) in Inventory 78,577

Total of change n) STANDBY PROVISION CORRECTION in 2018 During the year it was discovered that no accruals for standby allowance was made for payments paid in July for work performed in June each year. The correction was done retrospectively and are as follow:

Decrease / (increase) in Accumulated Surplus (Opening Balance 1 July 2017) 612,436

(Increase) / decrease in Trade and other payables from exchange transactions (Opening Balance 1 July 2017) (612,436)

Increase / (decrease) in Employee Related Costs 105,266 Standby Allowance 105,266

(Increase) / decrease in Trade and other payables from exchange transactions (105,266)

97 DRAKENSTEIN MUNICIPALITY NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 Restated 2019 2018 R R

(v) Other disclosure adjustments a) Financial Instruments Note 47, Financial instruments was restated as it was found to have contained errors in the prior year. b) Immaterial sub classes of income and expenditure Certain immaterial sub classes of Operational Revenue, Contracted services and Operational cost were grouped together as "other" under the respective notes. c) Additional disclosures in terms of the Supply Chain Management Regulations In note 45.1 and 45.2 additional awards to close family members were made, which was not disclosed in the prior year. All of the disclosure are as follow: Restated Previously - Deviation from, and ratification of minor breaches of, the Procurement Processes. Disclosure Reported

36 (1)(a) ii Dispense with official procurement processes if such goods or services are produced or 13,545,974 12,934,652 available from a single source or sole provider. Restated Previously - Awards to close family members of persons in service of the state - SCM Regulation 45 Disclosure Reported

Supplier Name Employee Name Relationship Department

Awards to close family members of persons in the service of Drakenstein Municipality Harold's Auto Repairs B van Rooy Child Drakenstein Municipality: 471,870 0 Engineering Services EHH Building Construction H Fredericks Brother Drakenstein Municipality 854,065 0

Awards to close family members of persons in the service of other state departments and entities (not listed above) TC Event Management (Pty) L Johnson Brother South African Police Services 2,185,521 0 Ltd Conlog (Pty) Ltd M Moodly Spouse Department of Health 495,350 - 4,006,806 0 42. OPERATING LEASE COMMITMENTS

Land and Buildings 24,196,376 306,421 Payable within one year 7,456,491 111,316 Payable within two to five years 16,739,885 195,105 Payable after more than five years 0 0 24,196,376 306,421 The Municipality has significant current lease arrangements for land and buildings over a period varying from 2 years and 4 months up to 9 years and 11 months being subject to increased lease payments.

All contingent lease payments are based on the actual contract value of the property leased and the escalations vary from 5.6% up to 8.5% (2018: 8.5%).

No other restrictions were imposed.

Total commitments: Municipality as Lessee 24,196,376 306,421

The Municipality as Lessor At Statement of Financial Performance date the Municipality has contracted with tenants for the following future minimum lease payments. Receivable within one year 666,068 507,923 Receivable within two to five years 1,145,466 469,429 Receivable after more than five years 125,712 32,717 1,937,246 1,010,069 The Municipality has significant current lease arrangements for land and buildings over a period varying from 2 up to 32 years (2018: 2 up to 32 years) being subject to increased lease payments.

All contingent lease payments are based on the actual contract value of the property leased and the escalations vary from 7.5% up to 12.32%.

No other restrictions were imposed.

98 DRAKENSTEIN MUNICIPALITY NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 Restated 2019 2018 R R

43. UNAUTHORISED, IRREGULAR, FRUITLESS AND WASTEFULL EXPENDITURE DISALLOWED

43.1 UNAUTHORISED EXPENDITURE 43.1.1 Application of Sec (a) of the definition of Unauthorised expenditure in terms of the MFMA - Total Operating Budget Reconciliation of unauthorised expenditure - Per Sec (a) of the definition of Unauthorised expenditure Opening balance 0 0 Unauthorised expenditure for financial year 0 0 Original Unauthorised expenditure reported 0 0 Restatement of expenditure due to change in accounting policy or correction of errors 0 0 Written off by Council 0 0 Unauthorised expenditure awaiting authorisation 0 0

The over expenditure incurred during the year is attributable to the following categories: Non-cash 0 0 Cash 0 0 0 0

43.1.2 Application of Sec (b) of the definition of Unauthorised expenditure in terms of the MFMA - Operating Budget Reconciliation of unauthorised expenditure - Per Sec (b) of the definition of Unauthorised expenditure (Vote - GFS) Opening balance 994,744 0 Unauthorised expenditure for financial year (Aggregate of GFS Functions overspent) 12,117 0 Prior year transaction identified in the current financial year 23,285,287 994,744 Written off by Council (994,744) 0 Unauthorised expenditure awaiting authorisation 23,297,405 994,744

Refer to appendix B3 for more detail

2018 / 2019 UNAUTHORISED EXPENDITURE PER GOVERNMENT FINANCIAL AMOUNT ACTUAL STATISTICS (GFS) BUDGET UNAUTHORISED WRITTEN OFF BY EXPENDITURE COUNCIL R R R R COMMUNITY AND SOCIAL SERVICES 36,901,201 36,746,061 0 0 ENERGY SOURCES 928,545,463 910,226,893 0 0 ENVIRONMENTAL PROTECTION 1,312,024 1,312,023 0 0 EXECUTIVE AND COUNCIL 76,288,621 74,596,074 0 0 FINANCE AND ADMINISTRATION 264,248,689 259,026,644 0 0 HOUSING 150,478,078 106,719,838 0 0 INTERNAL AUDIT 3,525,815 3,277,503 0 0 PLANNING AND DEVELOPMENT 52,666,817 52,666,816 0 0 PUBLIC SAFETY 40,505,165 40,505,165 0 0 ROAD TRANSPORT 262,304,871 248,287,065 0 0 SPORT AND RECREATION 102,277,656 95,795,283 0 0 WASTE MANAGEMENT 132,495,644 126,899,828 0 0 WASTE WATER MANAGEMENT 177,365,956 172,333,283 0 0 WATER MANAGEMENT 142,625,180 142,637,297 (12,117) 0 2,371,541,180 2,271,029,772 (12,117) 0

99 DRAKENSTEIN MUNICIPALITY NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 Restated 2019 2018 R R

2017 / 2018 AMOUNT UNAUTHORISED EXPENDITURE PER GOVERNMENT FINANCIAL ACTUAL BUDGET UNAUTHORISED WRITTEN OFF BY STATISTICS (GFS) EXPENDITURE COUNCIL R R R R EXECUTIVE AND COUNCIL 36,917,753 33,477,126 0 0 BUDGET AND TREASURY OFFICE 861,163,846 871,245,061 (10,081,215) 0 CORPORATE SERVICES 998,823 977,321 0 0 PLANNING AND ECONOMIC DEVELOPMENT 76,254,034 65,432,205 0 0 COMMUNITY AND SOCIAL SERVICES 248,195,347 243,634,570 0 0 HOUSING 125,952,819 84,354,547 0 0 PUBLIC SAFETY 3,787,579 2,817,068 0 0 SPORT AND RECREATION 29,361,955 28,042,567 0 0 WASTE MANAGEMENT 37,259,680 36,232,328 0 0 WASTE WATER MANAGEMENT 254,711,619 255,707,057 (995,438) 994,744 ROAD TRANSPORT 84,900,602 80,966,873 0 0 WATER 139,486,271 128,617,501 0 0 ELECTRICITY 143,326,131 155,534,765 (12,208,634) 0 ENVIROMENTAL PROTECTION 129,526,212 128,900,031 0 0 2,171,842,671 2,115,939,020 (23,285,287) 994,744

43.1.3 Application of Sec (b) of the definition of Unauthorised expenditure in terms of the MFMA - Total Operating Budget

Reconciliation of unauthorised expenditure - Per Sec (b) of the definition of Unauthorised expenditure (Vote - Department)

Opening balance 0 0 Unauthorised expenditure for financial year (Aggregate of Departments overspent) 0 0 Prior year transaction identified in the current financial year 13,268,809 0 Written off by Council 0 0 Unauthorised expenditure awaiting authorisation 13,268,809 0

2018 / 2019 AMOUNT ACTUAL BUDGET UNAUTHORISED WRITTEN OFF BY EXPENDITURE COUNCIL UNAUTHORISED EXPENDITURE PER VOTE (DEPARTMENT) R R R R COMMUNITY SERVICES 506,886,233 437,877,634 0 0 CORPORATE SERVICES 102,280,714 101,302,615 0 0 DEPARTMENT OF CHIEF AUDIT EXECUTIVE 3,525,815 3,277,503 0 0 DEPARTMENT OF COMMUNICATION 1,829,009 1,369,046 0 0 DEPARTMENT OF IDP & PMS 857,770 302,870 0 0 DEPARTMENT OF RISK & COMPLIANCE 2,302,872 2,266,758 0 0 ENGINEERING SERVICES 1,620,967,401 1,606,869,323 0 0 FINANCIAL SERVICES 74,959,171 62,626,066 0 0 OFFICE OF THE CITY MANAGER (546,557) (820,819) 0 0 PLANNING AND ECONOMIC DEVELOPMENT 58,478,752 55,958,777 0 0 2,371,541,180 2,271,029,772 0 0 Refer to appendix B2 for more detail 2017 / 2018 AMOUNT ACTUAL BUDGET UNAUTHORISED WRITTEN OFF BY EXPENDITURE COUNCIL UNAUTHORISED EXPENDITURE PER VOTE (DEPARTMENT) R R R R COMMUNITY SERVICES 310,204,912 303,386,695 0 0 CORPORATE SERVICES 125,068,966 138,337,775 (13,268,809) 0 DEPARTMENT OF CHIEF AUDIT EXECUTIVE 3,787,579 2,817,068 0 0 DEPARTMENT OF COMMUNICATION 2,555,918 1,573,931 0 0 DEPARTMENT OF IDP & PMS 1,605,269 1,178,669 0 0 DEPARTMENT OF RISK & COMPLIANCE 2,505,964 1,907,373 0 0 ENGINEERING SERVICES 1,472,515,462 1,460,594,196 0 0 FINANCIAL SERVICES 77,096,614 76,137,168 0 0 OFFICE OF THE CITY MANAGER (231,158) (239,539) 0 0 PLANNING AND ECONOMIC DEVELOPMENT 176,733,145 130,245,682 0 0 2,171,842,671 2,115,939,018 (13,268,809) 0

100 DRAKENSTEIN MUNICIPALITY NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 Restated 2019 2018 R R

43.1.4 Application of Sec (a) of the definition of Unauthorised expenditure in terms of the MFMA - Total Capital Budget Reconciliation of unauthorised expenditure - Per Sec (a) of the definition of Unauthorised expenditure (Total Capital Budget) Opening balance 0 0 Unauthorised expenditure for financial year 8,749,147 0 Original Unauthorised expenditure reported 8,749,147 0 Restatement of expenditure due to change in accounting policy or correction of errors 0 0 Written off by Council 0 0 Unauthorised expenditure awaiting authorisation 8,749,147 0 The over expenditure incurred during the year is attributable to the following categories: Non-cash 0 0 Cash - Parys Sub-Station fire 8,749,147 0 8,749,147 0 43.1.5 Application of Sec (b) of the definition of Unauthorised expenditure in terms of the MFMA - Capital Budget Reconciliation of unauthorised expenditure - Per Sec (b) of the definition of Unauthorised expenditure (Vote - GFS) Opening balance 0 0 Unauthorised expenditure for financial year (Aggregate of GFS Functions overspent) 18,764,268 0 Written off by Council 0 0 Unauthorised expenditure awaiting authorisation 18,764,268 0

Refer to appendix B3 for more detail

2018 / 2019 UNAUTHORISED EXPENDITURE PER GOVERNMENT FINANCIAL AMOUNT ACTUAL STATISTICS (GFS) BUDGET UNAUTHORISED WRITTEN OFF BY EXPENDITURE COUNCIL R R R R COMMUNITY AND SOCIAL SERVICES 4,783,757 4,783,751 0 0 ENERGY SOURCES 136,439,399 155,203,667 (18,764,268) 0 ENVIRONMENTAL PROTECTION 0 0 0 0 EXECUTIVE AND COUNCIL 215,983 215,981 0 0 FINANCE AND ADMINISTRATION 36,134,912 36,093,352 0 0 HOUSING 48,691,561 38,737,059 0 0 INTERNAL AUDIT 59,506 59,506 0 0 PLANNING AND DEVELOPMENT 165,848 165,848 0 0 PUBLIC SAFETY 2,989,241 2,988,448 0 0 ROAD TRANSPORT 77,518,190 77,518,186 0 0 SPORT AND RECREATION 23,477,234 23,477,213 0 0 WASTE MANAGEMENT 3,086,792 3,086,791 0 0 WASTE WATER MANAGEMENT 56,164,521 56,164,519 0 0 WATER MANAGEMENT 174,039,217 174,039,211 0 0 563,766,161 572,533,531 (18,764,268) 0 Authorised (18,764,268) Unauthorised 0 (18,764,268)

101 DRAKENSTEIN MUNICIPALITY NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 Restated 2019 2018 R R

2017 / 2018 AMOUNT UNAUTHORISED EXPENDITURE PER GOVERNMENT FINANCIAL ACTUAL BUDGET UNAUTHORISED WRITTEN OFF BY STATISTICS (GFS) EXPENDITURE COUNCIL R R R R COMMUNITY AND SOCIAL SERVICES 11,624,101 11,566,699 0 0 ENERGY SOURCES 145,772,200 145,641,968 0 0 ENVIRONMENTAL PROTECTION 0 0 0 0 EXECUTIVE AND COUNCIL 3,974,405 3,633,010 0 0 FINANCE AND ADMINISTRATION 50,930,990 50,336,317 0 0 HOUSING 30,708,952 30,708,351 0 0 INTERNAL AUDIT 10,068 10,068 0 0 PLANNING AND DEVELOPMENT 132,854 132,534 0 0 PUBLIC SAFETY 313,164 5,543 0 0 ROAD TRANSPORT 65,046,473 65,021,923 0 0 SPORT AND RECREATION 16,496,291 16,445,517 0 0 WASTE MANAGEMENT 107,580,297 107,563,292 0 0 WASTE WATER MANAGEMENT 206,337,906 206,320,268 0 0 WATER MANAGEMENT 15,751,296 15,592,655 0 0 654,678,997 652,978,145 0 0

Authorised 0 Unauthorised 0 0

43.1.6 Application of Sec (b) of the definition of Unauthorised expenditure in terms of the MFMA - Capital Budget

Reconciliation of unauthorised expenditure - Per Sec (b) of the definition of Unauthorised expenditure (Vote - Departments) Opening balance 0 0 Unauthorised expenditure for financial year 18,724,999 0 Written off by Council 0 0 Unauthorised expenditure awaiting authorisation 18,724,999 0

2018 / 2019 AMOUNT ACTUAL BUDGET UNAUTHORISED WRITTEN OFF BY EXPENDITURE COUNCIL UNAUTHORISED EXPENDITURE PER VOTE (DEPARTMENTS) R R R R COMMUNITY SERVICES 86,538,845 76,581,263 0 0 CORPORATE SERVICES 7,896,509 7,896,498 0 0 DEPARTMENT OF CHIEF AUDIT EXECUTIVE 59,506 59,506 0 0 DEPARTMENT OF COMMUNICATION 24,773 24,773 0 0 DEPARTMENT OF IDP & PMS 0 0 0 0 DEPARTMENT OF RISK & COMPLIANCE 0 0 0 0 ENGINEERING SERVICES 467,041,401 485,766,400 (18,724,999) 0 FINANCIAL SERVICES 1,275,318 1,275,292 0 0 OFFICE OF THE CITY MANAGER 0 0 0 0 PLANNING AND ECONOMIC DEVELOPMENT 929,809 929,799 0 0 563,766,161 572,533,531 (18,724,999) 0 Refer to appendix B4 for more detail

102 DRAKENSTEIN MUNICIPALITY NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 Restated 2019 2018 R R

2017 / 2018 AMOUNT ACTUAL UNAUTHORISED WRITTEN OFF BY BUDGET EXPENDITURE COUNCIL UNAUTHORISED EXPENDITURE PER VOTE (DEPARTMENTS) R R R R COMMUNITY SERVICES 32,835,472 32,391,148 0 0 CORPORATE SERVICES 14,506,397 13,679,839 0 0 DEPARTMENT OF CHIEF AUDIT EXECUTIVE 10,068 10,068 0 0 DEPARTMENT OF COMMUNICATION 46,715 45,725 0 0 DEPARTMENT OF IDP & PMS 0 0 0 0 DEPARTMENT OF RISK & COMPLIANCE 30,195 30,194 0 0 ENGINEERING SERVICES 571,189,669 570,813,335 0 0 FINANCIAL SERVICES 3,887,517 3,850,943 0 0 OFFICE OF THE CITY MANAGER 104,585 98,581 0 0 PLANNING AND ECONOMIC DEVELOPMENT 32,068,379 32,058,308 0 0 654,678,997 652,978,141 0 0

43.2 FRUITLESS AND WASTEFUL EXPENDITURE

Opening Balance 1,863 1,863 Fruitless expenditure current year 0 0 Payments received during the year 0 0 Approved by council (1,863) 0 Closing Balance 0 1,863

Incident Disciplinary steps/criminal proceedings Payment of interest to SARS Additional tax was levied on the municipality as a 0 1,863 result of an input vat claim on an invoice that was disallowed by SARS due to non-compliance to the VAT Act.

0 1,863

103 DRAKENSTEIN MUNICIPALITY NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 Restated 2019 2018 R R

43.3 IRREGULAR EXPENDITURE Opening Balance 39,619,202 11,593,900 Irregular expenditure current year 9,687,909 28,103,615 Payments received during the year 0 0 Approved by council (47,854,766) (78,313) Irregular expenditure identified in the current year relating to prior years 0 0 Closing Balance 1,452,345 39,619,202 * Council certified an amount of R46,299,919 (award amount) for CES 07/2015 and CES08/2018 as irrecoverbale and to be written off. Incident Disciplinary steps/criminal proceedings/reasons for write-offs Service Provider in Service of the State Transaction identified during the year, investigated 6,000 0 and report submitted to Council. Amounts written off as recommended. Expansion of contract CES 07/2015 (Upgrade and Investigated and report submitted to Council. 2,074,945 7,581,229 extension of the Wellington Waste Water Amounts written off as recommended. Treatment Works to 16ML / day : Mechanical and Electrical Installation) Expansion of contract CES 08/2015 (Upgrade and Investigated and report submitted to Council. 5,683,117 18,973,539 extension of the Wellington Waste Water Amounts written off as recommended. Treatment Works to 16ML / day : Civil Works) Deviation appointment of a consultant to render Investigated and report submitted to Council. 0 862,400 professional financial services. Amounts written off as recommended.

Deviation appointment of a service provider to Investigated and report submitted to Council. 0 175,000 perform a municipal security audit. Amounts written off as recommended. The lowest quotation was not accepted. This Investigated and report submitted to Council. 0 12,246 resulted in non-compliance with paragraph Amounts written off as recommended. 18(1)(f) of Council's Supply Chain Management Policy. Requirements for services were not dealt with as 2018: Investigated and report submitted to Council. 477,886 292,000 a single transaction. This resulted in non- Amounts written off as recommended. compliance with Regulation 12(3) of the 2019: To be investigated in terms of Council's Policy Municipal Supply Chain Management on Unauthorised, Irregular, Fruitless and Wasteful Regulations, 2005. Expenditure. Non-compliance to local production and content Investigated and report submitted to Council. 0 162,000 requirements in terms of Regulation 6 and 8 of Amounts written off as recommended. the Preferential Procurement Regulations, 2017. The bidder's claim for B-BBEE points differed Investigated and report submitted to Council. 0 45,201 between their declaration and their sworn Amounts written off as recommended. affidavit. The Auditor-General of SA determined that the declaration made by the supplier on the MBD 6 should be compared to the sworn affidavit or B-BBEE verified certificate to verify the declaration. Revised intrepretation of the application of To be investigated in terms of Council's Policy on 1,445,962 0 Regulation 32 of the Municipal Supply Chain Unauthorised, Irregular, Fruitless and Wasteful Management Regulations as included in MFMA Expenditure. Circular No. 96 dated 24 July 2019. 9,687,909 28,103,615 All above mentioned amounts exclude VAT. Irregular Expenditure have been restated according to GRAP 3.

44. ADDITIONAL DISCLOSURES IN TERMS OF MUNICIPAL FINANCE MANAGEMENT ACT

44.1 Contributions to SALGA Opening balance (4,377,820) 1,341,047 Council subscriptions 6,080,552 5,705,625 Amount paid - current year (6,810,931) (11,424,492) Amount paid - previous years 0 0 Balance of advance payment (included in creditors) (5,108,199) (4,377,820)

104 DRAKENSTEIN MUNICIPALITY NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 Restated 2019 2018 R R

44.2 Audit fees Opening balance 0 0 Current year audit fee 8,446,736 7,498,208 Amount paid - current year (8,446,736) (7,498,208) Amount paid - previous years 0 0 Balance unpaid (included in creditors) 0 0

44.3 VAT VAT output payables and VAT input receivables are shown in Note 18. All VAT returns have been submitted by the due date throughout the year.

44.4 PAYE Opening balance 0 0 Current year payroll deductions 83,143,228 68,988,348 Amount paid - current year (83,143,228) (68,988,348) Amount paid - previous years 0 0 Balance unpaid (included in creditors) 0 0

44.5 UIF Opening balance 0 0 Current year payroll deductions 6,787,059 6,229,151 Amount paid - current year (6,787,059) (6,229,151) Amount paid - previous years 0 0 Balance unpaid (included in creditors) 0 0

44.6 Pension Deductions Opening balance 0 0 Current year payroll deductions and council contributions 96,479,568 83,637,501 Amount paid - current year (96,479,568) (83,637,501) Amount paid - previous years 0 0 Balance unpaid (included in creditors) 0 0

44.7 Medical Aid Deductions Opening balance 0 0 Current year payroll deductions and council contributions 38,210,684 33,313,547 Amount paid - current year (38,210,684) (33,313,547) Amount paid - previous years 0 0 Balance unpaid (included in creditors) 0 0

44.8 Councillors arrear consumer accounts outstanding more than 90 days

The following Councillors had arrear accounts outstanding for more than 90 days as at 31 July 2018 Outstanding more than 90 days R CL NP/ZC MBENENE 4,758 4,758

The following Councillors had arrear accounts outstanding for more than 90 days as at 31 August 2018 Outstanding more than 90 days R CL NP/ZC MBENENE 1,455 CL HJ KOTZE 77 1,532

The following Councillors had arrear accounts outstanding for more than 90 days as at 30 September 2018 Outstanding more than 90 days R CL NP/ZC MBENENE 1,245 1,245

105 DRAKENSTEIN MUNICIPALITY NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 Restated 2019 2018 R R

The following Councillors had arrear accounts outstanding for more than 90 days as at 31 October 2018 Outstanding more than 90 days R CL P/A TC MANGENA 28 28

The following Councillors had arrear accounts outstanding for more than 90 days as at 30 November 2018 Outstanding more than 90 days R CL P/A TC MANGENA 28 28

The following Councillors had arrear accounts outstanding for more than 90 days as at 31 December 2018 Outstanding more than 90 days R

CL ARA CUPIDO 4 4

The following Councillors had arrear accounts outstanding for more than 90 days as at 31 January 2019 Outstanding more than 90 days R

CL DS BLANKENBERG 14,765 CL P/A TC MANGENA 1,234 15,999

The following Councillors had arrear accounts outstanding for more than 90 days as at 28 February 2019 Outstanding more than 90 days R

CL P/A TC MANGENA 918 918

The following Councillors had arrear accounts outstanding for more than 90 days as at 31 March 2019 Outstanding more than 90 days R

CL NP / ZC MBENENE 1,798 1,798

44.9 Non-Compliance with Chapter 11 of the Municipal Finance Management Act

Non Compliance to the following sections of chapters of the MFMA : CHAPTER SECTION SUB - SECTION 8 74 1

106 DRAKENSTEIN MUNICIPALITY NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 Restated 2019 2018 R R

45. ADDITIONAL DISCLOSURES IN TERMS OF THE SUPPLY CHAIN MANAGEMENT REGULATIONS 45.1 Deviation from, and ratification of minor breaches of, the Procurement Processes In terms of section 36(2) of the Supply Chain Management Policy approved by Council it is stipulated that bids where the formal procurement processes could not be followed, must be noted in the financial statements. SCM PARAGRAPH DESCRIPTION OF DEVIATION REFERENCE 36 (1)(a) i Dispense with the official procurement processes in an emergency 303,181 30,647,402 36 (1)(a) ii Dispense with official procurement processes if such goods or services are produced or 14,154,398 13,545,974 available from a single source or sole provider. 36 (1)(a) v Dispense with official procurement processes in any other exceptional case where it is 4,741,468 17,998,081 impractical or impossible to follow the official procurement processes. Total Deviations 19,199,047 62,191,457 45.2 Awards to close family members of persons in service of the state - SCM Regulation 45

Supplier Name Employee Name Relationship Department

Awards to close family members of persons in the service of Drakenstein Municipality Business Connexion C van Der Bank Spouse Drakenstein Municipality: Planning 8,061,338 5,602,688 & Development D Uren Vibracrete Z Naidoo Child Drakenstein Municipality: Finance 2,417,973 430,244

Wab Printmedia (Pty) Ltd A Brink Spouse Drakenstein Municipality: Finance 93,916 42,912

Aurecon South Africa (Pty) Ltd P W Pansegrouw Spouse Drakenstein Municipality: 24,638,003 34,547,056 Engineering Services Harold's Auto Repairs B van Rooy Child Drakenstein Municipality: 811,592 471,870 Engineering Services JT Joubert T/A Mynhardt I Engelmohr Spouse Drakenstein Municipality: Finance 18,872 0 Joubert Decco Suppliers And J Abrahams Parent Drakenstein Municipality: Planning 0 67,906 Distributors & Development EHH Building Construction H Fredericks Brother Drakenstein Municipality 626,184 854,065 Franthe Projects M Davids Parent Drakenstein Municipality 6,300 0 Awards to close family members of persons in the service of other state departments and entities (not listed above)

CSM Consulting Services (Pty) A Van Collie Child Department of Environmental 2,984,478 4,610,803 Ltd Affairs LJ Projects and Events C Jafta Spouse Department of Water Affairs 6,400 23,940 Mpumannazi Group CC E R Bowers Parent Department of Health - 33,468 VAT Guide Consulting CC S Daniels Spouse South African Revenue Services - 92,000 Mubescko Africa (PTY) Ltd J Niehaus Spouse Northern Cape department of 1,028,543 0 Health

NTC Cleaning and General L Mtirara Spouse Department Correctional Services 24,197 0 Services (PTY) Ltd TC Event Management (Pty) L Johnson Brother South African Police Services 168,725 2,185,521 Ltd

Succido Enterprises L Johnson Spouse Passenger Rail Agency of South 152,996 0 Africa Motheo Construction Group R Mantlhasi Parent Department of Home Affairs 26,522,450 0 (Pty) Ltd

Water Solutions South Africa G Luthili & Spouse Gauteng Department of Social 24,643 113,291 (Pty) Ltd Development T Zwane Spouse Ekurhuleni Metro Municipality Humafield (Pty) Ltd N Kobeli Spouse South Africa Social Security Agency 911,432 0 (SASSA) Conlog (Pty) Ltd M Moodly Spouse Department of Health 1,869,143 495,350 70,367,184 49,571,114

107 DRAKENSTEIN MUNICIPALITY NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 Restated 2019 2018 R R

46 CAPITAL COMMITMENTS . Commitments in respect of capital expenditure: - Approved and contracted for 132,264,113 348,311,454 Infrastructure * 121,903,536 271,868,108 Other * 10,360,577 76,443,346 Intangibles * 0 0 Total 132,264,113 348,311,454 * All capital commitments exclude VAT

47. FINANCIAL INSTRUMENTS

47.1 Fair Value of Financial Instruments

The management of the municipality is of the opinion that the carrying value of Financial Assets and Financial Liabilities recorded at amortised cost in the Annual Financial Statements approximate their fair values, except for the listed Government stock. In accordance with GRAP 104 the Fair Values of Financial Assets and Financial Liabilities, together with the carrying amounts shown in the Statement of Financial Position, are as follow: 2019 2018 NOTE Carrying Fair Carrying Fair Amount Value Amount Value R R R R FINANCIAL ASSETS Fair Value 124,968 124,968 128,762 128,762 Listed Investments 15 124,968 124,968 128,762 128,762

Amortised cost 342,076,370 342,076,370 478,844,343 478,844,343 Non-current receivables from exchange 16 834,850 834,850 1,256,030 1,256,030 transactions Trade and other receivables from exchange 19 275,237,812 275,237,812 248,159,349 248,159,349 transactions Current portion of non-current receivables 16 150,118 150,118 329,048 329,048

Cash and cash equivalents 21 65,853,590 65,853,590 229,099,916 229,099,916

Total Financial Assets 342,201,337 342,201,337 478,973,105 478,973,105

FINANCIAL LIABILITIES Amortised cost Unsecured Bank Facilities: 1,448,886,182 1,448,886,182 1,334,533,654 1,334,533,654 - Annuity Loans 5 1,446,315,652 1,446,315,652 1,333,295,042 1,333,295,042 - Finance leases 5 2,570,530 2,570,530 1,238,612 1,238,612 Trade and Other Payables: 517,061,992 517,061,992 419,157,021 419,157,021 - Consumer Deposits 8 57,004,529 57,004,529 44,822,374 44,822,374 Trade and- Trade other and payables Other Payables from exchange from exchange transactions 9 273,012,326 273,012,326 199,807,600 199,807,600 transactions - Current Portion of Borrowings 5 184,388,046 184,388,046 171,335,664 171,335,664 - Current Portion of Finance leases 5 2,657,091 2,657,091 3,191,384 3,191,384

Total Financial Liabilities 1,965,948,173 1,965,948,173 1,753,690,675 1,753,690,675

Total Financial Instruments (1,623,746,836) (1,623,746,836) (1,274,717,570) (1,274,717,570)

108 DRAKENSTEIN MUNICIPALITY NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 Restated 2019 2018 R R

The Fair Values of Financial Assets and Financial Liabilities are determined as follow: The Fair Value of Long term liabilities is determined in accordance with generally accepted pricing models based on discounted cash flow analysis using prices from observable current market transactions and dealer quotes for similar instruments. The fair value of Other Financial Assets and Financial Liabilities were determined after considering the standard terms and conditions of agreements entered into between the municipality and other parties as well as the current payment ratio's of the municipality's debtors.

The Annual Financial Statements include holdings in Listed Government Stock which are measured at Fair Value (Note 15). Fair Value is estimated with standard terms and conditions and traded on active liquid markets is determined with reference to quoted market prices.

Assumptions used in determining Fair Value of Financial Assets and Financial Liabilities The table below analyses Financial Instruments carried at Fair Value at the end of the reporting period by the level of fair-value hierarchy as required by GRAP 104. The different levels are based on the extent to which quoted prices are used in the calculation of the Fair Value of the Financial Instruments. The levels have been defined as follow: Level 1:- Fair Values are based on quoted market prices (unadjusted) in active markets for an identical instrument.

Level 2:- Fair Values are calculated using valuation techniques based on observable inputs, either directly (i.e. as prices) or indirectly (i.e. derived from prices). This category includes instruments valued using quoted market prices in active markets for similar instruments, quoted prices for identical or similar instruments in markets that are considered less than active, or other valuation techniques where all significant inputs are directly or indirectly observable from market data. Level 3:- Fair Values are based on valuation techniques using significant unobservable inputs. This category includes all instruments where the valuation technique includes inputs not based on observable data and the unobservable inputs have a significant effect on the instrument’s valuation. Also, this category includes instruments that are valued based on quoted prices for similar instruments where significant unobservable adjustments or assumptions are required to reflect differences between the instruments.

30 June 2019 NOTE Level 1 Level 2 Level 3 Total R R R R FINANCIAL ASSETS Financial Instruments at Fair Value: Listed Investments 15 124,968 0 0 124,968 Total Financial Assets 124,968 0 0 124,968

FINANCIAL LIABILITIES Financial Instruments at Fair Value: Other Loans 0 0 0 0 Total Financial Liabilities 0 0 0 0

Total Financial Instruments 124,968 0 0 124,968

109 DRAKENSTEIN MUNICIPALITY NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 Restated 2019 2018 R R

30 June 2018 Level 1 Level 2 Level 3 Total R R R R FINANCIAL ASSETS Financial Instruments at Fair Value: Listed Investments 15 128,762 0 0 128,762 Total Financial Assets 128,762 0 0 128,762

FINANCIAL LIABILITIES Financial Instruments at Fair Value: Other Loans 0 0 0 0 Total Financial Liabilities 0 0 0 0

Total Financial Instruments 128,762 0 0 128,762

47.2 Capital Risk Management The municipality manages its capital to ensure that the municipality will be able to continue as a going concern while delivering sustainable services to consumers through the optimisation of the debt and equity balance.

The capital structure of the municipality consists of debt, which includes the Long-term Borrowings disclosed in Note 5; Cash and Cash Equivalents disclosed in Note 21; and Equity, comprising Funds, Reserves and Accumulated Surplus as disclosed in Notes 2 to 4 and the Statement of Changes in Net Assets.

47.3 Financial Risk Management Objectives Due to largely non-trading nature of activities and the way in which they are financed, municipalities are not exposed to the degree of financial risk faced by business entities. Financial instruments play a much more limited role in creating or changing risks that would be typical of listed companies to which the IFRS mainly apply. Generally, financial assets and liabilities are generated by day-to-day operational activities and are not held to manage the risks facing the municipality in undertaking its activities.

The Department: Financial services monitors and manages the financial risks relating to the operations through internal policies and procedures. These risks include interest rate risk, credit risk and liquidity. Compliance with policies and procedures is reviewed by internal auditors on a continuous basis, and by external auditors annually. The entity does not enter into or trade financial instruments for speculative purposes. Internal audit and Risk management, responsible for monitoring and responding to potential risk, reports quarterly to the municipality’s audit committee, an independent body that monitors the effectiveness of the internal audit function. 47.4 Significant Accounting Policies Details of the significant Accounting Policies and methods adopted, including the criteria for recognition, the basis of measurement and the basis on which income and expenses are recognised, in respect of each class of Financial Asset, Financial Liability and Equity Instrument are disclosed in the Accounting Policies to the Annual Financial Statements. 47.5 Market risk The municipality’s activities expose it primarily to the financial risks of changes in interest rates (see Note 47.6 below). No formal policy exists to hedge volatilities in the interest rate market.

47.6 Interest Rate Risk Interest Rate Risk is defined as the risk that the fair value or future cash flows associated with a financial instrument will fluctuate in amount as a result of market interest changes. Potential concentrations of interest rate risk on financial assets consist mainly of fixed deposit investments and bank and cash balances. The municipality is not exposed to a high level of interest rate risk on its financial liabilities. All of the Municipality‘s interest bearing external loan liabilities, as detailed in Appendix A, are fixed interest rate loans. Similarly with financial assets, the Municipality invests its surplus funds on fixed interest rate deposits with banks for fixed terms not exceeding one year. The municipality’s maximum exposures to interest rates on Financial Assets and Financial Liabilities are detailed in the Credit Risk Management section of this note.

110 DRAKENSTEIN MUNICIPALITY NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 Restated 2019 2018 R R

47.7 Liquidity risk Ultimate responsibility for liquidity risk management rests with the Council. The Municipality manages liquidity risk by effectively managing its working capital, capital expenditure, external borrowings and cash flows. Standby credit facilities are available with the Municipality’s main banker to cater for any unexpected temporary shortfall in operating funds. 30 June 2019 Maturity analysis Within 1 year 2 to 5 years 5 years + Total Annuity Loans 346,965,300 1,497,340,151 556,536,834 2,400,842,285 Finance 3,027,669 2,807,932 0 5,835,601 PayablesLeases from exchange transaction 273,012,326 0 0 273,012,326 623,005,295 1,500,148,082 556,536,834 2,679,690,211 30 June 2018 (Restated) Maturity analysis Within 1 year 2 to 5 years 5 years + Total Annuity Loans 320,062,081 1,019,523,555 816,619,973 2,156,205,609 Finance 3,436,732 1,325,827 0 4,762,559 PayablesLeases from exchange transaction 199,807,600 0 0 199,807,600 523,306,413 1,020,849,382 816,619,973 2,360,775,768

The municipality expects to meet its other obligations from operating cash flows and proceeds of maturing financial assets. The municipality expects to maintain its current debt to equity ratio. This will be achieved through the annual increase in tariffs to maintain the accumulated surplus, as well as the increased use of unsecured bank loan facilities. 47.8 Credit Risk Management Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the municipality. Potential concentrations of credit risk consist mainly of fixed deposit investments, long-term debtors, consumer debtors, other debtors, short-term investment deposits and bank and cash balances. The Municipality manages credit risk in its borrowing and investing activities by only dealing with well- established financial institutions of high credit standing, and by spreading its exposure over a range of such institutions in accordance with its approved investment policies. Credit risk relating to consumer debtors is managed in accordance with the Municipality’s credit control and debt collection policy. The Municipality’s credit exposure is spread over a large number and wide variety of consumers and is not concentrated in any particular sector or geographical area. Adequate provision has been made for anticipated bad and doubtful debts. Additional information relating to the analysis of consumer debtors is given in the accounting policies and Note 19 to the financial statements. The municipality does not have any significant credit risk exposure to any single counterparty or any group of counterparties having similar characteristics. The municipality defines counterparties as having similar characteristics if they are related entities. The credit risk on liquid funds is limited because the counterparties are banks with high credit-ratings. The carrying amount of financial assets recorded in the Annual Financial Statements, which is net of impairment losses, represents the municipality’s maximum exposure to credit risk without taking account of the value of any collateral obtained. The maximum credit and interest risk exposure in respect of the relevant financial instruments is as follow: NOTE Investments 15 124,968 128,762 Long-term Receivables 16 984,968 1,585,078 Trade and other receivables from exchange transactions 19 275,237,812 248,159,349 Bank and Cash Balances 21 65,853,590 229,099,916

Maximum Credit and Interest Risk Exposure 342,201,338 478,973,105 47.9 Other Price Risks The municipality is not exposed to equity price risks arising from equity investments as the municipality does not trade these investments.

48. PUBLIC PRIVATE PARTNERSHIPS Waste to Energy (WtE) In prior years the Municipality started with a Public Private Partnership process with a private party, Interwaste, to establish a proposed WtE Facility with the objective of pursuing an alternative integrated waste management solution other than landfilling. On 31 May 2018 the Council of the Drakenstein Municipality took the decision to terminate the proposed Wellington WtE project.

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49. RELATED PARTY TRANSACTIONS

Transactions with Key Management Personnel and Councillors: Compensation made to Key Management Personnel and Councillors is disclosed in note 30 above. Consumer services rendered to Key Management Personnel amount to R 79,417 (2018: R 55,870). Outstanding balances on Key Management Personnel's consumer accounts at 30 June 2019 (Current Accounts) amount to R0 (2018: R 0). Consumer services rendered to Councillors amount to R 1,269,763 (2018: R 1,140,474). Outstanding balances on Councillors' consumer accounts at 30 June 2019 amount to R77,258 (2018: R92,164). The consumer services are in accordance with approved tariffs that was advertised to the public. No bad debt expenses had been recognised in respect of amounts owed by related parties.

The amounts outstanding are unsecured and will be settled in cash. Consumer Deposits were received from Key Management Personnel and Councillors. No expense has been recognized in the period for bad or doubtful debts in respect of the amounts owed by related parties. Not all persons in the service of the state is seen as related parties as defined in IPSAS 20, as they do not necessarily control or have an interest that gives them significant influence over the municipality. For disclosure purposes in terms of Supply Chain Management Regulations 46, awards to close family members of persons in the service of the state are disclosed in note 46.2. 50. RETIREMENT BENEFIT INFORMATION The Municipality makes provision for post-retirement benefits to eligible Councillors and employees who belong to different pension schemes. These funds are governed by the Pension Funds Act and include both defined benefit and defined contribution schemes. The only obligation of the municipality with respect to the retirement benefit plans is to make the specified contributions. Where councillors / employees leave the plans prior to full vesting of the contributions, the contributions payable by the municipality are reduced by the amount of forfeited contributions. The total expense recognised in the Statement of Financial Performance of R96,479,569 (2018: R83,637,501) represents contributions payable to these plans by the municipality at rates specified in the rules of the plans. These schemes are subject to a tri-annual, bi-annual or annual actuarial valuation as set out hereunder.

a) LA RETIREMENT FUND (PREVIOUSLY CAPE JOINT PENSION FUND)

The LA RETIREMENT FUND operates both as a defined benefit and defined contribution scheme. Defined Benefit Scheme The contribution rate payable is under the defined benefit section is 27%, 9% by the members and 18% by their councils. The actuarial valuation report at 30 June 2018 disclosed an actuarial valutation amounting to R1,776,181,000 (30 June 2017 : R1,859,077,000), with a nett accumulated surplus of R63,423,000 (2017 : R46,989,000), with a funding level of 103.7% (30 June 2017 : 102.6%).

Defined Contribution Scheme The actuarial valuation report at 30 June 2018 indicated that the defined contribution scheme of the fund is in a sound financial position, with a assets amounting to R2,018,237,000 (30 June 2017 : R1,911,937,000), net investment reserve of R0 (30 June 2017 : R0) and with a funding level of 100% (2017 : 100%). The actuary concluded that : - The Pensioner account has a funding level of 103.7% with n surplus of R63.4 million and is in a sound financial condition as at the valuation date. - There is a surplus of R63.4 million in The DB Section excluding The surplus in The Pensioner Account. The surplus has been allocated to The Pensioner Account. - The overall funding level in respect of the DB Section including the Pensioner Account is 101.7% with a surplus of R63.0 million. - The DC Section has a funding level of 100% and is in n sound Financial condition. - Overall the fund is in a sound financial condition with a surplus of R63.0 million and the overall funding level of 101.7%. The Trustees awarded a 3.22% pension increase effective 1 January 2019.

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It is to be noted that : - All the active members have now all been converted to the DC Section. - There is no longer any contribution rate shortfall as this only applied to 29 residual DB Section active members, that have now also converted to the DC Section and - Both the DC Section and the DB Section were fully funded as at the valuation date. The last statutory valuation performed as at 30 June 2018 revealed that the net assets of the fund amounted to R24,108,000,000 (30 June 2017: R21,417,000,000 ). The members share account and processing reserve account had assets amounting to R23,318,184,000 (2017: R20,643,329,000), and the pensions account had assets amounting to R651,455,000 (2017: R652,773,000) with funding levels of 100% and 100.4% (30 June 2017 127.3% and 100%) for the Pensions Account and the Share Account respectively. The Presevation Pension Account showed a suplus of R0 and was 100% funded for both 2018 & 2017. The contribution rate paid by the members (7,50%) and the municipalities (7.50%/19.50%) is sufficient to fund the benefits accruing from the fund in the future. The actuary certified that the structure of the assets is appropriate relative to the nature of the liabilities, given normal circumstances and that the Fund is in a sound financial condition as at the valuation date. b) CONSOLIDATED RETIREMENT FUND FOR LOCAL GOVERNMENT (PREVIOUSLY CAPE JOINT RETIREMENT FUND) The last statutory valuation performed as at 30 June 2018 revealed that the net assets of the fund amounted to R24,108,000,000 (30 June 2017: R21,417,000,000 ). The members share account and processing reserve account had assets amounting to R23,318,184,000 (2017: R20,643,329,000), and the pensions account had assets amounting to R651,455,000 (2017: R652,773,000) with funding levels of 100% and 100.4% (30 June 2017 127.3% and 100%) for the Pensions Account and the Share Account respectively. The Presevation Pension Account showed a suplus of R0 and was 100% funded for both 2018 & 2017. The contribution rate paid by the members (7,50%) and the municipalities (7.50%/19.50%) is sufficient to fund the benefits accruing from the fund in the future. The actuary certified that the structure of the assets is appropriate relative to the nature of the liabilities, given normal circumstances and that the Fund is in a sound financial condition as at the valuation date.

c) SALA PENSION FUND

The SALA Pension Fund operates both as a defined benefit and defined contribution scheme. The statutory valuation performed as at 1 July 2018 revealed that the assets of the fund amounted to R14,298,600.00 (30 June 2015 : R13,231,200.00), with funding levels of 96.0% (30 June 2015: 100%). Recommended that employers continue to contribute at the current rate of 19.18% of pensioners salaries. It is the actuary's opinion that : - They are satisfied with the investment strategy of the Fund; - the nature of the assets is, in their opinion, suitable for the nature of the liabilities of the Fund as defined in the Rules of the Fund; - the matching of assets with the liabilities of the Fund is adequate; and - the insurance arrangements are appropriate compared to the cover provided can be regarded as financially sound at the valuation date.

d) MUNICIPAL COUNCILLORS' PENSION FUND The Municipal Councillors Pension Fund operates as a defined contribution scheme. The last statutory valuation was performed as at 30 June 2015 and revealed that the assets of the fund amounted to R2,551,861,000 (30 June 2014 : R2,229,410,000), with funding levels of 101.08% (30 June 2014: 98.83%). The contribution rate paid by the members (13,75 %) and council (15 %) is sufficient to fund the benefits accruing from the fund in the future. The Actuary certified that the Fund was in a sound financial condition as at 30 June 2015, in that the assists of the fund were sufficient to cover the accrued service liabilities including the recommended contingency reserves in full. The Municipal Councilors Pension Fund operates as a defined contribution scheme. The statutory valuation performed as at 30 June 2015 revealed that the assets of the fund amounted to R2,551,861,000 (30 June 2014 : R2,229,410,000), with funding levels of 101.08% (30 June 2014: 98.83%). The contribution rate paid by the members (13,75 %) and council (15 %) is sufficient to fund the benefits accruing from the fund in the future. The Acturay certified that the Fund was in a sound financial condition as at 30 June 2015, in that the assests of the fund were sufficient to cover the accrued service liabilities including the recommended contingency reserves in full.

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e) NATIONAL FUND FOR MUNICIPAL WORKERS The fund operates as a defined contribution fund and in terms of the rules of the fund category A and category C members contribute at a rate as agreed upon by the Local Authority and the member, subject to an absolute minimum contribution of 2% and 5% of their remuneration respectively. Category C-Members, appointed after 1 July 2012, who are not part of the Schedule shall make monthly contributions to the Fund equal to 7.5% of their Remuneration. The Local Authority must contribute in respect of category A and category C members such an amount as agreed between the Local Authority and the fund, subject to a minimum contribution rate of 2% and 5% of their remuneration respectively. Category B members are members who belong to both category A and C and the Local Authority must, on behalf of such members, not contribute less than 7% of their remuneration. The contribution rates stipulated above include the amount payable towards the insured risk benefits policy. The last statutory valuation performed as at 30 June 2015 revealed that the assets of the fund amounted to R10,050,029,000 (30 June 2014 : R9,031,759,000), with funding levels of 100.42% (30 June 2014: 100.10%). The actuary certified that the assets of the fund are sufficient to cover 100.42% of the members’ liabilities, also that it can be expected that the funding level of a fund of this nature will fluctuate around 100%, for example due to timing differences in investment and receipt of monies, slight mismatching of assets and liabilities and processing errors.

f) THE MUNICIPAL WORKERS RETIREMENT FUND ( PREVIOUSLY SOUTH AFRICAN MUNICIPAL WORKERS UNION NATIONAL PROVIDENT FUND) The Municipal Workers Retirement Fund is a defined contribution scheme. Members contribute at a rate of not less than 7.5% of salaries, as required by the Rules. The employers contribute at a total rate of not less than 18%.From 1 July 2017, members and employers that fall under other bargaining councils or forums are not bound by the above minimum contribution rates. The statutory valuation performed as at 30 June 2017 revealed that the assets of the fund amounted to R7,720,948.000 (30 June 2011 : R6,574,75.00), with funding levels of 102.0% (30 June 2014: 111.7%). As a percentage of members’ Fund Credits, the investment smoothing reserve has decreased from 5.6% to 4.9% over the valuation period. As a percentage of the market value of assets, it has decreased marginally from 4.6% to 4.4%.The Fund’s assets are sufficient to cover the members’ Fund Credits, the targeted levels of the risk benefits reserve and the data and processing error reserve, and an investment smoothing reserve of 4.9% of members’ Fund Credits as at 30 June 2017. In addition, there is brought-forward surplus of some R152.8 million which has been allocated to former members and is awaiting payment. The Fund is therefore in a sound financial position.

51. CONTINGENCIES Contingent Liabilities Paarl Print (Pty) Ltd - Destruction of property Claim for damages 448,819,504 448,819,504 A fire destroyed the Paarl Print property erf 25867, Paarl during September 2009. As a result of this incident, the applicant during March 2012 lodged a claim against the Municipality to the amount of R448,819,503.79. Claim was referred to Council’s insurers and notice of intention to defend was lodged by the insurer’s legal representatives. A court date has not yet been set. Should Council be unsuccessful in defending the claim, there is a possibility that the claim will be settled. No further action since 2012.

A Maans - Paarl Print Claim for damages 0 2,000,000

The Municipality was sued by the spouse of an employee of Paarl Print who was killed during the Paarl Print fire (refer above). The action was withdrawn and considered finalised.

D Theys, OL Veroni & H Carolissen - Damages 416,000 416,000 The plaintiffs are claiming from the Municipality for damages after hitting a sandbag and then collided with a fence. The matter is being dealt with by the insurer's attorney. Waiting for plaintiff to set the matter down for hearing. The claims of D Theys, OL Veroni and HL Carolissen have now been consolidated into one case.

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M & T De Villiers - Damages 351,639 351,639 The matter has been referred to our internal insurer department on 14/12/2015. Attorney firm Visagie Vos has been appointed to act on behalf of Drakenstein Municipality's Insurer. Notice of intention to Defend has been filed and the exchange of pleadings has been finalised. It is now for the Plaintiff to apply for a trail date and the waiting period for such a date is approximately 18 months. Waiting or the plaintiff to set the matter down for hearing. It should be noted that the estimated financial exposure belongs to the insurer and not the Municipality per se.

Drakenstein Municipality - Distell Ltd 0 113,651 The plaintiff claims for the amount of R113 650.50 due to payment that was erroneously made on Municipal account. Notice of intention to defend filed at court 27/11/2015. Van der Sluys Builders was joined as a third party. Matter has been settled.

J Abrahams 0 162,785 Claim for unfair dismissal by a former employee, Mr Abrahams. Case was dismissed, but employee has appealed and requested his job back.

N Muller 0 990,713 Claim for unfair dismissal by a former employee, Mr N Muller, who was dismissed in December 2017. Case has been settled.

M Siebert 9,141 9,141 The plaintiff, M Siebert is claiming from the Municipality for damages folowing a collission. The matter is being referred to the internal insurance department.

W Swanepoel 23,147 23,147 The plaintiff, W Swanepoel is claiming from the Municipality for damages after driving through a pothole. The matter is being referred to the Municipality's insurers.

S Hendricks obo R Hendricks 2,736,000 2,736,000 The plaintiff claiming on behalf of her son for general damages; for pain and suffering, loss of amenities of life, disability, and disfigurement and shock. The Municipality is the second respondent.

Wellington Association Against The Incinerator 100,000 100,000 Alleged no-compliance to legislation and requested an order to set project aside. Pmatters are being kept in abeyance pending settlement negotiations. Exposure is represented by estimated legal costs and disbursements that the Municipality may be liable for. Matter is dormant.

Vissershok Investment (PTY)LTD; Wilcrest Construction (PTY)LTD 0 100,000 The plaintiff, sought order to the effect that the matter is urgent, that the Municipality be ordered to approve the building plans of various erven, a written undertaking by the MM is given that henceforth compliance with Section 7 of the Act will be had and that the Municipality is to bear the cost of the application on an attorney and own client scale. Matter has been settled.

Riaan Nieuwoudt 0 102,692 The plaintiff, The plaintiff claim is for general damages; after the Plaintiff stepped into an uncovered storm water drain and the Plaintiff fell into a manhole. Matter finalised.

Dirk du Toit 32,424 0 The plaintiff claim is for general damages occurred by a storm water drain.

Francois Levens 500,000 0 The plaintiff claim is for general damages; after the plaintiff was wrongfully and unlawfully assualted and robbed. Matter referred to internal insurance department.

Wilma Quinn 200,000 0 The plaintiff claim is for general damages occurred by a burst water pipe on her property. Matter referred to internal insurance department.

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Morne van Rooi 17,799 0 The plaintiff, The plaintiff claim is for general damages; after collision by the Plaintiff and a vehicle of the Municipality. Matter referred to the internal insurance department.

Karin Smidt 151,690 0 The plaintiff, The plaintiff claim is for general damages; after a fall by the Plaintiff on a pavement. Matter referrred to the internal insurance department

M Manus 37,128 0 Risk adverse cost order has been issued against the Municipality after the defendant defaulted on their municipal bill, brought an order to have the services reconnected, which was then contested by the Municipality. The Municipality is laible for the defendants legal costs, but will at the same time begin a debt recovery process on the defendant for the outstanding Municipal services account.

Contingent Assets WK Construction (Pty) Ltd, Neil Lyners & Associates CC 0 2,900,047 Claim for damages to a bridge due to negligence from the defendant for the Construction of a bulk sewer at Southern Paarl. The Defendants suggested that the parties investigate a possible settlement and by implication conceded the merits. Matter has been settled.

Neil Lyners & Associates CC 300,000 4,081,208 Claim for damages during installation of Civil Infrastructure services under contract CES9/2011 Siyahlala. Formal letter of demand was served on the Respondent dated 22/07/2015. Summons was issued. Awaiting a date to appear before a supervising Judge to prepare for trial. Matter still in progress.

Insurance Claim - Parys Substation fire 24,394,037 0 A dispute with the insured underwriter with regards to the amount of the insurance claim to be paid out by the insurance company, and the uncertainty on the claim amount to be paid out, no provision could be made in the 2018/19 Capital Adjustment Budget in February 2019.

Veolia Water Solutions and Technologies South Africa (Pty) Ltd 1,900,000 0 Claim for penalties to be imposed due to the delay in the completion of the Welvanpas Reservoir.

52. BIOLOGICAL ASSETS The Municipality has various species of Proteacea growing on the Paarlberg (Erf 1 Paarl), a National heritage site. Due to the fact that the plants are growing in a nature reserve it is protected by the Nature Conservation Act 19 of 1974 a special permit must be obtained to harvest any seeds produced by these plants. These plant grow wild and is exposed to natural conditions such as fire, furthermore there is no input cost by the municipality in order to enhance the growth of these plants or to control it as what would normally be seen in an agricultural activity. These plants produce seedlings on a yearly basis that can result in plants but the municipality cannot determine the quantity of plants as theses plants are all in different stages of growth. For the reasons above these plants are not recognised and accounted for in terms of GRAP 27, Agriculture. An assessment will be made once GRAP 110, Living and Non-living Resources, become effective as to the applicability thereof on these assets.

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53. DISTRIBUTION LOSSES WATER Reconciliation of water losses Kilolitres bought 10,428,832 10,258,258 Kilolitres sold 8,836,669 8,731,928 Total kilolitres lost - technical and non-technical 1,592,163 1,526,330 Kilolitres lost - Technical 1,377,669 1,452,342 Kilolitres lost - Non technical 214,494 73,988 Average value of losses (cost) 657,462 407,517 Percentage of losses * 15.27% 14.88% - Technical 13.21% 14.16% - Non-technical 2.06% 0.72% Norm of losses 15.00% 15.00% Reasons for losses: Burst pipes Use of unmetered fire water connections at flat buildings and factories. Open spaces & sports fields that are still unmetered Undetected leaks underground Scouring of mainlines and reservoirs as part of the operational procedure to ensure good water quality *The water losses per the Annual Financial Statements takes into account water that was metered but not billed. Whereas the Annual Performance Report shows an actual technical water loss of 13.21% (2018: 14.16%), as unbilled metered water is not taken into account. ELECTRICITY Reconciliation of KWh losses KWh units bought 728,501,883 720,083,263 KWh units sold 688,291,696 672,402,760 KWh units lost (Technical and Non-technical) 40,210,187 47,680,503 Average value of losses (cost) 37,185,778 41,848,081 Percentage of losses 5.52% 6.62% Norm of losses 10.00% 10.00% Reasons for losses: Technical losses Unmetered services Theft 54. REPORTING AGAINST THE FRAMEWORK FOR SCHEDULE 4 OF DORA ALLOCATIONS Submit project registrations and detail project implementation plans before the prescribed due dates. Department of Provincial and Local Government is monitoring the overall programme implementation.

55. REGISTERED MIG PROGRAMMES FOR THE 2018/2019 FINANCIAL YEAR Received Expenditure Closing Balance Upgrading of Mbekweni B and C Sports Fields P-CNIEU SPT/REC OUTDOOR F 6,831,538 6,831,538 0 Replacement of Strawberry King bulk water P-CIEU WAT BULK MAINS 16,277,356 16,277,356 0 Replacement of Saron bulk water P-CIEU WAT BULK MAINS 6,877,193 6,877,192 1 29,986,087 29,986,086 1 REGISTERED MIG PROGRAMMES FOR THE 2017/2018 FINANCIAL YEAR Received Expenditure Closing Balance

Upgrading of Mbekweni B and C Sports Fields 4,645,888 4,645,888 0 Replacement of Strawberry King bulk water 9,271,930 9,271,930 0 11 ML Newton Reservoirs 10,068,724 10,068,724 0 Welvanpas WTW & Outbuildings 8,186,325 8,186,325 0 Wellington WWTW: rehabilitation & extent 9,210,279 9,210,279 0 Street Lighting: Wellington 367,692 367,692 0 PMU 1,000,001 1,000,001 0 42,750,839 42,750,839 0 56. NON-ADJUSTING EVENTS AFTER REPORTING DATE The Dal-Wes 11kV switchgear and part of the feeder cable from the Dalweiding Substation was damaged by a fire on Sunday, 28 July 2019. The estimated damage amounts to R10,000,000. A claim has been submitted to the municipality's insurers and the claim is in the process of being assessed. Should the claim not be approved, the municipality will be responsible for the cost of repair. Drakenstein Municipality is in the process of refinancing existing 10 year loans by extending the repayment terms.

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57. RECONCILIATION OF BUDGET SURPLUS/(DEFICIT) WITH THE SURPLUS/(DEFICIT) IN THE STATEMENT OF FINANCIAL PERFORMANCE: Net surplus/(deficit) per the statement of financial performance (43,793,258) Basis Differences Revenue By Source Property rates - Property rates - penalties & collection charges (Surcharges and Taxes*) 1,339,281 Service charges - electricity revenue (992,910,171) Service charges - water revenue (167,819,936) Service charges - sanitation revenue (95,320,698) Service charges - refuse revenue (101,138,835) Service charges - other - Service Charges * 1,332,489,665 Rental of facilities and equipment (Rental of Fixed Assets*) 24,740,523 Interest earned - external investments (14,223,574) Interest earned - outstanding debtors (10,902,171) Fair value adjustments Financial Assets - Finance income and Dividends* 23,798,567 Licences and permits 14,180,071 Fines - Agency services - Transfers recognised - operational / (Transfers and Subsidies*) 162,693,344 Other revenue (Operational Revenue (Exchange)*) (30,234,273) Operational Revenue ( Non - Exchange)* 14,369,654 Sale of Goods and Rendering of Services* 16,001,550 Inventory Surpluses - Gains on disposal of PPE (38,005,786) Fair value adjustments Investment Property* 1,950,000 Gains from assets from non exchange transactions * (1,938,761) Total Revenue (excluding capital transfers and contributions) 139,068,451 Expenditure By Type Employee related costs (2,935,787) Remuneration of councillors (Councillor Related Cost *) - Collection cost - Debt impairment 105,608,249 Impairment losses on financial assets (105,608,249) Depreciation & asset impairment (Depreciation and Amortisation *) - Impairment Losses (1,006,785) Finance charges (Interest paid *) - Bulk purchases 678,014,058 Bulk Purchases : Electricity * (673,707,616) Bulk Purchases : Water* (4,306,442) Contracted services (3,273,785) Transfers and grants (Transfers and Subsidies : Operational Exp*) (122,821) Other expenditure (Operational Expenditure*) 41,440,564 Inventory consumed* - Operating Leases* (31,688,152) Loss on disposal of PPE (Gains /(losses) on disposal of PPE, IA, IP & HA*) 10,988,574 Gains(losses) on inventory (2,306,042) Fair value adjustments Financial Assets* (3,795) Total Expenditure 11,091,973 Surplus/(Deficit) Transfers recognised - capital (150,160,424) Contributions recognised - capital Contributed assets Surplus/(Deficit) after capital transfers & contributions (43,793,258) Timing differences - Entity differences - Net surplus/deficit per statement of budget comparison (43,793,258)

Budget basis differences mainly relate to Revenue from Housing Grants and the related Housing operating expenditure where Drakenstein Municipality is regarded as an agent in terms of GRAP amounting to R 813,097. The mSCOA tables and the format of the Budget Schedules as issued by National Treasury are not yet fully aligned to the Standards of GRAP and this is therefore the reason for the disparity in classifications between the 2018/19 Budget and GRAP Annual Financial Statements. * - Statement of Financial Performance classifications

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58. BUDGET INFORMATION

The budget has been prepared on the accrual basis of accounting in accordance with the prescripts of the Municipal Budget regulations as well as MFMA Budget circulars. In accordance with the Municipal Budget regulations, the classification basis the municipality presents its budget is per economic as well as per functional classification (per Vote (Department) and GFS classification). It should be noted that minor budget differences between the basis the budget is prepared (accrual basis and prescripts of NT guidance) and actual financial results (accrual basis in accordance with GRAP) exists, mainly related to technical GRAP adjustments required. These differences are not material and as the basis of preparation is the same (accrual basis) no restatements have been made to the financial information compared to the budgeted amounts, but where found to be material is explained below: 58.1 Explanation of variances between approved and final budget amounts The reason for the variances between the approved and final budgets are mainly due to reallocations made within the approved budget parameters allowed for by the Virement Policy of Drakenstein Municipality as approved by Council.

58.2 Explanation of variances greater than 10%: Final Budget and Actual amounts 58.2.1. Statement of financial position i) Current Assets - Inventories Capital spares as identified is excluded from Inventories . - Receivables from non-exchange Budget included under Other Debtors . - Other Debtors Budget includes provision for Receivables from non-exchange - Cash and cash equivalents Decreased cash and cash equivalents due to capital spending. - Current Portion of Long-term Receivables Actual was less than anticipated due to increase in impairment in the previous financial year.

ii) Non-Current Assets - Intangible Assets Impact of disposal and impairment of assets. - Investment Property Impact of disposal of assets. - Heritage Assets No seperate line item on budget schedules. Budget was included under Other Non-current Assets . - Other Non-current Assets Budget for Heritage Assets included in this line item. - Long-term Receivables Impact of impairment on actual long-term receivables.

iii) Current Liabilities - Consumer Deposits During the period under review the actuals were more than estimated. - Provisions Actual included under Retirement Benefit Liabilities and Finance Lease Liability. Increased employee related provisions due - Payables No line item for Retirement Benefit Liabilities and Finance Lease Liability on the regulated budget schedules. - Unspent Conditional Grants No line item for the above on the regulated budget schedules. - Current portion of Retirement Benefit Liabilities No line item for the above on the regulated budget schedules. - Current portion of Finance Leases No line item for the above on the regulated budget schedules.

iv) Non-current Liabilities - Retirement Benefit Liabilities No line item for the above on the regulated budget schedules. Budget was included under "Non current provisions ". - Non-current Provisions No line item for Retirement Benefit Liabilities and Finance Lease Liability on the regulated budget schedules. Budget was included under the above. - Finance lease liability No line item for the above on the regulated budget schedules. Budget was included under "Non current provisions ".

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v) Net Assets - Statutory Funds No line item for the above on the regulated budget schedules. Budget was included under "Reserves" . - Reserves All "internal" reserves, which forms part of the Accumulated Surplus, were incorrectly included in the above budget. - Accumulated Surplus / (Deficit) All "internal" reserves, which forms part of the Accumulated Surplus, were incorrectly included in the budget for "Reserves" .

58.2.2. Statement of financial performance i) Revenue from Non-exchange Transactions - Fines Additional information acquired throughout the year ended in a change in estimate. - Licences and Permits The projection was based on the prior periods collection. Less licences were issued than anticipated. - Transfers recognised - Operational Underspending on the allocation from Department of Human Settlements due to various reasons.

ii) Revenue from Exchange Transactions - Rental of facilities and equipment Increased billing throughout the year . - Interest earned - External Investments Increase in investment portfolio resulted in more interest received. - Other Income - Gains on disposal of Property, Plant and Equipment Amount or impact of possible gains could not be estimated at time of budget compilation. iii) Expenditure - Contracted Services Underspending on the allocation from Department of Human Settlements due to delays in approved projects. - Impairment of Financial Assets Decrease in fines issued resulted in a decreased contribution for debt impairment. - Loss on Disposal of Property Plant and Equipment Amount or impact of possible losses could not be accurately estimated at time of budget compilation.

59. GOING CONCERN

In terms of the accounting standard GRAP 1, paragraphs 27 to 30, the annual financial statements are prepared on a going concern basis. The assumption is based on the fact that the municipality has a constitutional mandate to levy property rates and service charges to enable the municipality to be considered as a going concern even though the municipality will be operational over the short to medium term in a state where liquidity will be under pressure.

To improve liquidity, the municipality has introduced a revenue management, expenditure management and cost containment programme including an exercise to restructure existing long-term external loans. The municipality has made substantial investments in revenue generating infrastructure over the past five years that created capacity for development and growth. The municipality do have a stable and growing revenue base, although slower than projected five years ago.

The municipality has not defaulted on payment of creditors. By sustaining a revenue collection rate above 95%, the municipality do have the ability to operate as a going concern and to continue rendering services to its community.

120 APPENDIX A DRAKENSTEIN MUNICIPALITY : SCHEDULE OF EXTERNAL LOANS AS AT 30 JUNE 2019

Received Capitalised Redeemed/ EXTERNAL LOANS Interest Loan Redeemable Balance at during during written off Balance at Rate Number Date 30 June 2018 the period the period during the 30 June 2019 period R R R R R

ANNUITY AND OTHER LOANS DBSA 11.47% 103485/4 2019 7,761,136 0 0 7,761,134 2 DBSA 6.75% 103485/5 2019 1,615,709 0 0 1,615,716 (7) DBSA 10.026% 12007834 2024 64,210,091 0 0 8,283,363 55,926,728 DBSA 10.820% 12007999 2025 242,943,155 0 0 22,504,357 220,438,799 DBSA 9.970% 12008099 2028 120,000,000 0 0 7,472,017 112,527,983 DBSA 9.791% 12008099 2028 150,000,000 0 0 9,423,213 140,576,787 DBSA 10.700% 12008099 2028 100,943,285 0 0 6,061,375 94,881,910 DBSA 10.672% 12008099 2028 33,812,142 0 1,815,035 31,997,107 DBSA 12.278% 12008149 2029 0 100,000,000 0 0 100,000,000 DBSA 10.131% 12008149 2029 0 100,000,000 0 0 100,000,000 DBSA 9.872% 12008149 2029 0 58,626,160 0 0 58,626,160 NEDBANK 10.64% 7831030646-0001 2021 30,401,391 0 0 9,124,089 21,277,302 NEDBANK 8.63% 7831030646-0003 2019 4,797,292 0 0 4,797,292 0 NEDBANK 9.14% 7831030646-0004 2022 63,016,130 0 0 13,720,151 49,295,979 NEDBANK 9.93% 7831030646-0010 2025 156,975,040 0 0 16,452,685 140,522,355 ABSA BANK 9.40% 38-723-1263 2020 2,371,312 0 0 1,131,621 1,239,691 ABSA BANK 9.21% 40-8130-6651 2020 4,082,523 0 0 4,082,523 0 ABSA BANK 9.15% 38-723-1262 2019 5,991,944 0 0 2,861,433 3,130,511 STANDARD BANK 9.94% 023-157-917 2019 2,447,560 0 0 2,447,560 0 STANDARD BANK 10.26% 023-157-909 2021 4,196,464 0 0 1,262,995 2,933,469 STANDARD BANK 10.08% 07-218-4426 2023 36,011,538 0 0 5,862,120 30,149,419 STANDARD BANK 10.40% 07-215-4411 2020 14,022,276 0 0 6,656,537 7,365,739 STANDARD BANK 9.36% 07-221-4600 2020 2,902,649 0 0 1,385,548 1,517,101 STANDARD BANK 9.68% 07-221-4325 2022 3,820,293 0 0 825,238 2,995,056 STANDARD BANK 10.12% 072-221-4287 2027 467,064,201 0 0 33,997,440 433,066,762 STANDARD BANK 9.63% 410-682-101 2021 5,250,000 0 0 1,567,623 3,682,377 STANDARD BANK 9.87% 410-683-566 2023 13,806,715 0 0 2,189,247 11,617,468 STANDARD BANK 9.84% 009 733 922 2024 0 6,935,000 1 0 6,935,001 TOTAL ANNUITY LOANS AND OTHER 1,504,630,706 299,373,302 1 173,300,310 1,630,703,699 TOTAL EXTERNAL LOANS 1,504,630,706 299,373,302 1 173,300,310 1,630,703,699

121 APPENDIX B1 RECONCILIATION OF BUDGETED FINANCIAL PERFORMANCE (REVENUE AND EXPENDITURE BY STANDARD CLASSIFICATION) 2018/2019

BUDGET SHIFTING OF DESCRIPTION ADJUSTMENTS ACTUAL OUTCOME ACTUAL OUTCOME ADJUSTMENTS ADJUSTED FUNDS ACTUAL UNAUTHORISED ORIGINAL BUDGET (i.t.o. Council FINAL BUDGET VARIANCE AS % OF FINAL AS % OF ORIGINAL (i.t.o. s28 and s31 BUDGET (i.t.o. s31 of the OUTCOME EXPENDITURE approved by law) BUDGET BUDGET of the MFMA) MFMA) 1 2 3 4 5 6 7 8 9 10 11 REVENUE - STANDARD GOVERNANCE AND ADMINISTRATION (363,769,683) (32,110,206) (376,503,215) 0 0 (376,503,215) (380,986,945) 0 (4,483,730) 101.2% 104.7% Executive and Council (22,553,316) (9,688,337) (12,864,979) 0 0 (12,864,979) (16,382,083) 0 (3,517,104) 127.3% 72.6% Finance and Administration (341,216,367) (22,421,869) (363,638,236) 0 0 (363,638,236) (364,604,862) 0 (966,626) 100.3% 106.9% COMMUNITY AND PUBLIC SAFETY (140,549,931) (15,054,717) (155,604,648) 0 0 (155,604,648) (68,572,646) 0 87,032,002 44.1% 48.8% Community and Social Services (3,526,838) (132,524) (3,659,362) 0 0 (3,659,362) (4,313,735) 0 (654,373) 117.9% 122.3% Sport and Recreation (3,848,328) (442,275) (4,290,603) 0 0 (4,290,603) (3,202,244) 0 1,088,359 74.6% 83.2% Public Safety (1,744,565) 202,179 (1,542,386) 0 0 (1,542,386) (1,569,286) 0 (26,900) 101.7% 90.0% Housing (131,430,200) (14,682,097) (146,112,297) 0 0 (146,112,297) (59,487,381) 0 86,624,916 40.7% 45.3% ECONOMIC AND ENVIRONMENTAL SERVICES (126,814,361) (41,288,057) (168,102,418) 0 0 (168,102,418) (145,095,883) 0 23,006,535 86.3% 114.4% Planning and Development (318,611) (4,240,606) (4,559,217) 0 0 (4,559,217) (4,555,084) 0 4,133 99.9% 1429.7% Road Transport (126,495,750) (37,047,451) (163,543,201) 0 0 (163,543,201) (140,540,799) 0 23,002,402 85.9% 111.1% TRADING SERVICES (1,760,098,841) 95,325,932 (1,664,772,909) 0 0 (1,664,772,909) (1,632,581,039) 0 32,191,870 98.1% 92.8% Energy Sources (1,169,895,986) 48,528,810 (1,121,367,176) 0 0 (1,121,367,176) (1,103,935,072) 0 17,432,104 98.4% 94.4% Water Management (269,476,940) 22,709,317 (246,767,623) 0 0 (246,767,623) (233,263,331) 0 13,504,292 94.5% 86.6% Waste Water Management (166,421,533) 18,077,490 (148,344,043) 0 0 (148,344,043) (148,867,038) 0 (522,995) 100.4% 89.5% Waste Management (154,304,382) 6,010,315 (148,294,067) 0 0 (148,294,067) (146,515,599) 0 1,778,468 98.8% 95.0% TOTAL REVENUE - STANDARD (2,391,232,816) 6,872,952 (2,364,983,190) 0 (2,364,983,190) (2,227,236,514) 0 137,746,676 94.2% 93.1%

EXPENDITURE - STANDARD GOVERNANCE AND ADMINISTRATION 351,512,235 (7,449,110) 344,063,125 0 0 344,063,125 336,900,220 0 7,162,905 97.9% 95.8% Executive and Council 111,504,804 (35,216,183) 76,288,621 0 0 76,288,621 74,596,074 0 1,692,547 97.8% 66.9% Finance and Administration 236,767,897 27,480,792 264,248,689 0 0 264,248,689 259,026,644 0 5,222,045 98.0% 109.4% Internal Audit 3,239,534 286,281 3,525,815 0 0 3,525,815 3,277,503 0 248,312 93.0% 101.2% COMMUNITY AND PUBLIC SAFETY 365,610,242 (35,448,142) 330,162,100 0 0 330,162,100 279,766,346 0 50,395,754 84.7% 76.5% Community and Social Services 43,736,395 (6,835,194) 36,901,201 0 0 36,901,201 36,746,061 0 155,140 99.6% 84.0% Sport and Recreation 94,401,115 7,876,541 102,277,656 0 0 102,277,656 95,795,283 0 6,482,373 93.7% 101.5% Public Safety 42,062,871 (1,557,706) 40,505,165 0 0 40,505,165 40,505,165 0 0 100.0% 96.3% Housing 185,409,861 (34,931,783) 150,478,078 0 0 150,478,078 106,719,838 0 43,758,240 70.9% 57.6% ECONOMIC AND ENVIROMENTAL SERVICES 281,168,089 35,115,623 316,283,712 0 0 316,283,712 302,265,904 0 14,017,808 95.6% 107.5% Planning and Development 29,922,485 22,744,332 52,666,817 0 0 52,666,817 52,666,816 0 1 100.0% 176.0% Road Transport 250,217,190 12,087,681 262,304,871 0 0 262,304,871 248,287,065 0 14,017,806 94.7% 99.2% Environmental Protection 1,028,414 283,610 1,312,024 0 0 1,312,024 1,312,023 0 1 100.0% 127.6% TRADING SERVICES 1,393,375,772 (12,343,529) 1,381,032,243 0 0 1,381,032,243 1,352,097,301 0 28,934,942 97.9% 97.0% Energy Sources 942,689,401 (14,143,938) 928,545,463 0 0 928,545,463 910,226,893 0 18,318,570 98.0% 96.6% Water Management 147,471,528 (4,846,348) 142,625,180 0 0 142,625,180 142,637,297 0 (12,117) 100.0% 96.7% Waste Water Management 153,223,624 24,142,332 177,365,956 0 0 177,365,956 172,333,283 0 5,032,673 97.2% 112.5% Waste Management 149,991,219 (17,495,575) 132,495,644 0 0 132,495,644 126,899,828 0 5,595,816 95.8% 84.6% TOTAL - EXPENDITURE - STANDARD 2,391,666,338 (20,125,158) 2,371,541,180 0 2,371,541,180 2,271,029,772 0 100,511,408 95.8% 95.0% (SURPLUS)/DEFICIT FOR THE YEAR 433,522 (13,252,206) 6,557,990 0 0 6,557,990 43,793,258 0 (37,235,268) 667.8% 10101.7%

122 APPENDIX B2 RECONCILIATION OF BUDGETED FINANCIAL PERFORMANCE (REVENUE AND EXPENDITURE BY MUNICIPAL VOTE) 2018/2019 BUDGET SHIFTING OF ACTUAL ADJUSTMENTS ACTUAL DESCRIPTION ADJUSTMENTS ADJUSTED FUNDS ACTUAL UNAUTHORISED OUTCOME AS % ORIGINAL BUDGET (i.t.o. Council FINAL BUDGET VARIANCE OUTCOME AS % (i.t.o. s28 and s31 BUDGET (i.t.o. s31 of the OUTCOME EXPENDITURE OF ORIGINAL approved by law) OF FINAL BUDGET of the MFMA) MFMA) BUDGET 1 2 3 4 5 6 7 8 9 10 11 Revenue by Vote Office of the City Manager 0 0 0 0 0 0 0 0 0 0.0% 0.0% Corporate Services 24,331,304 (9,701,944) 14,629,360 0 0 14,629,360 18,172,895 0 (3,543,535) 124.2% 74.7% Community Services 250,225,177 42,574,933 292,800,110 0 0 292,800,110 182,811,243 0 109,988,867 62.4% 73.1% Financial Services 310,690,093 1,030,824 311,720,917 0 0 311,720,917 325,665,796 0 (13,944,879) 104.5% 104.8% Planning and Economic Development 5,201,585 1,572,217 6,773,802 0 0 6,773,802 8,387,180 0 (1,613,378) 123.8% 161.2% Engineering Services 1,800,784,657 (61,725,656) 1,739,059,001 0 0 1,739,059,001 1,692,199,400 0 46,859,601 97.3% 94.0% Department of Chief Audit Executive 0 0 0 0 0 0 0 0 0 0.0% 0.0% Department of Risk & Compliance 0 0 0 0 0 0 0 0 0 0.0% 0.0% Department of IDP & PMS 0 0 0 0 0 0 0 0 0 0.0% 0.0% Department of Communication 0 0 0 0 0 0 0 0 0 0.0% 0.0%

Total Revenue by Vote 2,391,232,816 (26,249,626) 2,364,983,190 0 0 2,364,983,190 2,227,236,514 0 137,746,676 94.2% 93.1%

Expenditure by Vote to be appropriated Office of the City Manager (968,045) 421,488 (546,557) 0 0 (546,557) (820,819) 0 274,262 150.2% 84.8% Corporate Services 81,132,325 21,148,389 102,280,714 0 0 102,280,714 101,302,615 0 978,099 99.0% 124.9% Community Services 525,145,104 (18,258,871) 506,886,233 0 0 506,886,233 437,877,634 0 69,008,599 86.4% 83.4% Financial Services 59,792,275 15,166,896 74,959,171 0 0 74,959,171 62,626,066 0 12,333,105 83.5% 104.7% Planning and Economic Development 66,156,259 (7,677,507) 58,478,752 0 0 58,478,752 55,958,777 0 2,519,975 95.7% 84.6% Engineering Services 1,650,488,051 (29,520,650) 1,620,967,401 0 0 1,620,967,401 1,606,869,323 0 14,098,078 99.1% 97.4% Department of Chief Audit Executive 3,239,534 286,281 3,525,815 0 0 3,525,815 3,277,503 0 248,312 93.0% 101.2% Department of Risk & Compliance 2,694,163 (391,291) 2,302,872 0 0 2,302,872 2,266,758 0 36,114 98.4% 84.1% Department of IDP & PMS 1,083,207 (225,437) 857,770 0 0 857,770 302,870 0 554,900 35.3% 28.0% Department of Communication 2,903,465 (1,074,456) 1,829,009 0 0 1,829,009 1,369,046 0 459,963 74.9% 47.2%

Total Expenditure by Vote 2,391,666,338 (18,720,255) 2,371,541,180 0 0 2,371,541,180 2,271,029,772 0 100,511,408 95.8% 95.0% Surplus/(Deficit) for the year (433,522) (7,529,371) (6,557,990) 0 0 (6,557,990) (43,793,258) 0 37,235,268 667.8% 10101.7%

123 APPENDIX B3 RECONCILIATION OF BUDGETED FINANCIAL PERFORMANCE (REVENUE AND EXPENDITURE) (APPROPRIATION STATEMENT) 2018/2019 BUDGET AUCTUAL SHIFTING OF VIREMENT AUCTUAL ADJUSTMENTS FINAL OUTCOME ORIGINAL FUNDS (i.t.o. Council UNAUTHORISED OUTCOME (i.t.o. s28 and ADJUSTMENTS FINAL BUDGET ACTUAL OUTCOME VARIANCE AS % OF BUDGET (i.t.o. s31 of the approved by EXPENDITURE AS % OF FINAL s31 of the BUDGET ORIGINAL MFMA) law) BUDGET DESCRIPTION MFMA) BUDGET 1 2 3 4 5 6 7 8 9 10 11 Revenue By Source Property rates 305,830,748 (29,848,722) 275,982,026 0 0 275,982,026 271,147,343 0 4,834,683 98.2% 88.7% Service charges - electricity revenue 1,066,320,982 (45,897,466) 1,020,423,516 0 0 1,020,423,516 992,910,171 0 27,513,345 97.3% 93.1% Service charges - water revenue 246,100,090 (64,514,952) 181,585,138 0 0 181,585,138 167,819,936 0 13,765,202 92.4% 68.2% Service charges - sanitation revenue 108,044,289 (13,493,075) 94,551,214 0 0 94,551,214 95,320,698 0 (769,484) 100.8% 88.2% Service charges - refuse revenue 111,452,497 (8,931,857) 102,520,640 0 0 102,520,640 101,138,835 0 1,381,805 98.7% 90.7% Service charges - other 0 0 0 0 0 0 0 0 0 0.0% 0.0% Rental of facilities and equipment 3,726,209 111,881 3,838,090 0 0 3,838,090 9,505,279 0 (5,667,189) 247.7% 255.1% Interest earned - external investments 22,000,000 (10,000,000) 12,000,000 0 0 12,000,000 14,223,574 0 (2,223,574) 118.5% 64.7% Interest earned - outstanding debtors 15,977,643 (4,347,568) 11,630,075 0 0 11,630,075 10,902,171 0 727,904 93.7% 68.2% Dividends received 0 0 0 0 0 0 0 0 0 0.0% 0.0% Fines 69,847,415 28,374,831 98,222,246 0 0 98,222,246 75,253,291 0 22,968,955 76.6% 107.7% Licences and permits 4,640,127 (560,842) 4,079,285 0 0 4,079,285 3,462,960 0 616,326 84.9% 74.6% Agency services 0 0 0 0 0 0 0 0 0 0.0% 0.0% Transfers recognised - operational 265,112,381 (6,276,854) 258,835,527 0 0 258,835,527 182,494,744 0 76,340,783 70.5% 68.8% Other revenue 86,997,435 13,480,070 100,477,505 0 0 100,477,505 120,935,904 0 (20,458,399) 120.4% 139.0% Inventory Surpluses 0 0 0 0 0 0 0 0 0 0.0% 0.0% Gains on disposal of PPE 250,000 39,590,653 39,840,653 0 0 39,840,653 42,515,071 0 (2,674,418) 106.7% 17006.0% Gains from assets from non exchange transactions 0 0 0 0 0 0 1,978,672 0 (1,978,672) 0.0% 0.0% Total Revenue (excluding capital transfers and contributions) 2,306,299,816 (102,313,901) 2,203,985,915 0 0 2,203,985,915 2,089,608,649 0 114,377,266 94.8% 90.6% Expenditure By Type Employee related costs 625,426,030 11,755,194 637,181,224 0 0 637,181,224 669,024,810 0 (31,843,586) 105.0% 107.0% Councillor related costs 31,229,363 (1,081,966) 30,147,397 0 0 30,147,397 29,945,188 0 202,209 99.3% 95.9% Debt impairment 100,409,320 29,139,343 129,548,663 0 0 129,548,663 105,608,249 0 23,940,414 81.5% 105.2% Depreciation & asset impairment 201,673,156 18,753,287 220,426,443 0 0 220,426,443 210,624,362 0 9,802,081 95.6% 104.4% Finance charges 144,574,379 21,685,142 166,259,521 0 0 166,259,521 158,386,286 0 7,873,235 95.3% 109.6% Bulk purchases 712,439,900 (30,578,815) 681,861,085 0 0 681,861,085 678,014,058 0 3,847,027 99.4% 95.2% Other materials 51,193,184 6,330,272 57,523,456 0 0 57,523,456 57,435,330 0 88,126 99.8% 112.2% Contracted services 293,276,792 (69,931,615) 223,345,177 0 0 223,345,177 143,311,694 0 80,033,483 64.2% 48.9% Transfers and grants 20,563,462 3,292,423 23,855,885 0 0 23,855,885 22,533,535 0 1,322,350 94.5% 109.6% Other expenditure 208,880,752 (16,388,423) 192,492,329 0 0 192,492,329 197,690,244 0 (5,197,915) 102.7% 94.6% Loss on disposal of PPE 2,000,000 6,900,000 8,900,000 0 0 8,900,000 10,988,574 0 (2,088,574) 123.5% 549.4% Total Expenditure 2,391,666,338 (20,125,158) 2,371,541,180 0 0 2,371,541,180 2,283,562,331 0 87,978,849 96.3% 95.5% Surplus/(Deficit) (85,366,522) (82,188,743) (167,555,265) 0 0 (167,555,265) (193,953,682) 0 26,398,417 115.8% 227.2% Transfers recognised - capital 84,933,000 76,064,275 160,997,275 0 0 160,997,275 150,160,424 0 10,836,851 93.3% 176.8% Surplus/(Deficit) after capital transfers & contributions (433,522) (6,124,468) (6,557,990) 0 0 (6,557,990) (43,793,258) 0 37,235,268 667.8% 10101.7% Surplus/(Deficit) for the year (433,522) (6,124,468) (6,557,990) 0 0 (6,557,990) (43,793,258) 0 37,235,268 667.8% 10101.7%

124 APPENDIX B4 RECONCILIATION OF BUDGETED CAPITAL EXPENDITURE BY VOTE, STANDARD CLASSIFICATION AND FUNDING

2018/2019 ACTUAL BUDGET SHIFTING OF ACTUAL FINAL VIREMENT OUTCOME ADJUSTMENTS (i.t.o. FUNDS UNAUTHORISED OUTCOME DESCRIPTION ORIGINAL BUDGET ADJUSTMENTS (i.t.o. Council FINAL BUDGET ACTUAL OUTCOME VARIANCE AS % OF s28 and s31 of the (i.t.o. s31 of EXPENDITURE AS % OF FINAL BUDGET approved by law) ORIGINAL MFMA) the MFMA) BUDGET BUDGET 1 2 3 4 5 6 7 8 9 10 11 Capital expenditure - Vote Multi-year expenditure Office of the City Manager 0 0 0 0 0 0 0 0 0 0.0% 0.0% Corporate Services 6,150,000 (3,149,210) 3,000,790 0 (148,334) 2,852,456 2,852,455 0 1 100.0% 46.4% Community Services 42,223,000 32,737,163 74,960,163 0 (19,484,434) 55,475,729 45,521,223 0 9,954,506 82.1% 107.8% Financial Services 0 0 0 0 0 0 0 0 0 0.0% 0.0% Planning and Economic Development 0 154,744 154,744 0 0 154,744 154,743 0 1 100.0% 0.0% Engineering Services 197,169,556 164,562,585 361,732,141 0 (13,520,638) 348,211,503 366,975,769 (18,764,266) (18,764,266) 105.4% 186.1% Department of the Chief Audit Executive 0 0 0 0 0 0 0 0 0 0.0% 0.0% Department of Risk & Compliance 0 0 0 0 0 0 0 0 0 0.0% 0.0% Department of IDP & PMS 0 0 0 0 0 0 0 0 0 0.0% 0.0% Department of Communication 0 0 0 0 0 0 0 0 0 0.0% 0.0%

Capital multi-year expenditure sub-total 245,542,556 194,305,282 439,847,838 0 (33,153,406) 406,694,432 415,504,191 (18,764,266) (8,809,759) 102.2% 169.2% Single-year expenditure Office of the City Manager 0 0 0 0 0 0 0 0 0 0.0% 0.0% Corporate Services 6,441,789 837,684 7,279,473 0 (2,235,420) 5,044,053 5,044,043 0 10 100.0% 78.3% Community Services 26,788,237 13,949,453 40,737,690 0 (9,674,574) 31,063,116 31,060,040 0 3,076 100.0% 115.9% Financial Services 1,000,000 466,937 1,466,937 0 (191,619) 1,275,318 1,275,292 0 26 100.0% 127.5% Planning and Economic Development 21,400,000 (20,577,142) 822,858 0 (47,793) 775,065 775,056 0 9 100.0% 3.6% Engineering Services 152,867,784 (28,049,557) 124,818,227 0 (5,988,329) 118,829,898 118,790,632 0 39,266 100.0% 77.7% Department of the Chief Audit Executive 0 59,506 59,506 0 0 59,506 59,506 0 0 100.0% 0.0% Department of Risk & Compliance 0 0 0 0 0 0 0 0 0 0.0% 0.0% Department of IDP & PMS 0 0 0 0 0 0 0 0 0 0.0% 0.0% Department of Communication 0 271,021 271,021 0 (246,248) 24,773 24,773 0 0 100.0% 0.0%

Capital single-year expenditure sub-total 208,497,810 (33,042,098) 175,455,712 0 (18,383,983) 157,071,729 157,029,340 0 42,389 100.0% 75.3% Total Capital Expenditure - Vote 454,040,366 161,263,184 615,303,550 0 (51,537,389) 563,766,161 572,533,531 (8,767,370) (8,767,370) 101.6% 126.1%

125 APPENDIX B4 RECONCILIATION OF BUDGETED CAPITAL EXPENDITURE BY VOTE, STANDARD CLASSIFICATION AND FUNDING

Capital Expenditure - Standard Governance and administration 33,888,220 5,705,531 39,593,751 0 (3,183,350) 36,410,401 36,368,839 0 41,562 99.9% 107.3% Executive and Council 0 252,735 252,735 0 (36,752) 215,983 215,981 0 2 100.0% 0.0% Finance and Administration 33,888,220 5,393,290 39,281,510 0 (3,146,598) 36,134,912 36,093,352 0 41,560 99.9% 106.5% Internal Audit 0 59,506 59,506 0 0 59,506 59,506 0 0 100.0% 0.0% Community and public safety 72,826,237 35,550,155 108,376,392 0 (28,434,599) 79,941,793 69,986,471 0 9,955,322 87.5% 96.1% Community and Social Services 7,935,779 (2,798,755) 5,137,024 0 (353,267) 4,783,757 4,783,751 0 6 100.0% 60.3% Sport and Recreation 44,500,893 (11,915,239) 32,585,654 0 (9,108,420) 23,477,234 23,477,213 0 21 100.0% 52.8% Public Safety 3,589,565 900,669 4,490,234 0 (1,500,993) 2,989,241 2,988,448 0 793 100.0% 83.3% Housing 16,800,000 49,363,480 66,163,480 0 (17,471,919) 48,691,561 38,737,059 0 9,954,502 79.6% 230.6% Health 0 0 0 0 0 0 0 0 0 0.0% 0.0% Economic and environmental services 61,957,971 21,820,334 83,778,305 0 (6,094,267) 77,684,038 77,684,033 0 5 100.0% 125.4% Planning and Development 0 296,843 296,843 0 (130,995) 165,848 165,848 0 1 100.0% 0.0% Road Transport 61,957,971 21,523,491 83,481,462 0 (5,963,272) 77,518,190 77,518,186 0 4 100.0% 125.1% Enviromental Protection 0 0 0 0 0 0 0 0 0 0.0% 0.0% Trading services 285,367,938 98,187,164 383,555,102 0 (13,825,173) 369,729,929 388,494,188 (18,764,268) (18,764,259) 105.1% 136.1% Energy Sources 129,469,565 6,969,834 136,439,399 0 0 136,439,399 155,203,667 (18,764,268) (18,764,268) 113.8% 119.9% Water Management 105,282,100 71,058,037 176,340,137 0 (2,300,920) 174,039,217 174,039,211 0 6 100.0% 165.3% Waste Water Management 47,616,273 20,072,501 67,688,774 0 (11,524,253) 56,164,521 56,164,519 0 2 100.0% 118.0% Waste Management 3,000,000 86,792 3,086,792 0 0 3,086,792 3,086,791 0 1 100.0% 102.9% Other 0 0 0 0 0 0 0 0 0 0.0% 0.0% Total Capital Expenditure - Standard 454,040,366 161,263,184 615,303,550 0 (51,537,389) 563,766,161 572,533,531 (8,767,370) (8,767,370) 101.6% 126.1%

Funded by: National Government 34,975,652 29,724,987 64,700,639 0 (1,499,881) 63,200,758 63,200,758 0 0 100.0% 180.7% Provincial Government 39,531,304 53,256,672 92,787,976 0 (9,625,269) 83,162,707 73,147,691 0 10,015,016 88.0% 185.0% District Municipality 0 0 0 0 0 0 0 0 0 0.0% 0.0% Other transfers and grants 0 0 0 0 0 0 0 0 0 0.0% 0.0% Transfers recognised - capital 74,506,956 82,981,659 157,488,615 0 (11,125,150) 146,363,465 136,348,449 0 10,015,016 93.2% 183.0% Public contributions & donations 0 0 0 0 0 0 0 0 0 0.0% 0.0% Borrowing 331,834,792 58,837,712 390,672,504 0 (33,662,886) 357,009,618 357,114,628 0 (105,010) 100.0% 107.6% Internally generated funds 47,698,618 19,443,813 67,142,431 0 (6,749,353) 60,393,078 79,070,454 0 (18,677,376) 130.9% 165.8% Total Capital Funding 454,040,366 161,263,184 615,303,550 0 (51,537,389) 563,766,161 572,533,531 0 (8,767,370) 101.6% 126.1%

126 APPENDIX B5 RECONCILIATION OF BUDGETED CASH FLOW 2018/2019

Budget Actual Outcome Actual Outcome Final adjustments Description Original Budget Adjustments (i.t.o. Final Budget Actual Outcome Variance as % of Final as % of Original budget s28) Budget Budget

1 2 3 4 5 7 8 9 CASH FLOW FROM OPERATING ACTIVITIES Receipts Ratepayers and other 1,848,280,674 (155,162,872) 1,693,117,802 1,693,117,802 1,646,999,286 (46,118,516) 97.3% 89.1% Government - operating 265,112,381 (6,276,854) 258,835,527 258,835,527 182,494,744 (76,340,783) 70.5% 68.8% Government - capital 84,933,000 44,357,482 129,290,482 129,290,482 150,160,424 20,869,942 116.1% 176.8% Interest 37,611,015 (14,286,812) 23,324,203 23,324,203 23,783,447 459,244 102.0% 63.2% Dividends 15,120 0 15,120 15,120 15,120 0 100.0% 100.0% Payments Suppliers and employees (1,795,834,557) 85,068,371 (1,710,766,187) (1,710,766,187) (1,582,601,811) 128,164,376 92.5% 88.1% Finance charges (144,574,379) (21,685,142) (166,259,521) (166,259,521) (158,386,286) 7,873,235 95.3% 109.6% Transfers and Grants (20,563,462) (3,733,500) (24,296,962) (24,296,962) (22,533,535) 1,763,427 92.7% 109.6% NET CASH FROM/(USED) OPERATING ACTIVITIES 274,979,792 (71,719,327) 203,260,465 203,260,465 239,931,389 36,670,924 118.0% 87.3%

CASH FLOWS FROM INVESTING ACTIVITIES Receipts Proceeds on disposal of PPE 250,000 (39,590,653) 39,840,653 39,840,653 33,471,669 (6,368,984) 84.0% 13388.7% Decrease (increase) other non-current receivables 0 0 0 0 421,180 421,180 0.0% 0.0% Payments Capital assets (408,636,329) 145,212,026 (553,848,355) (502,310,966) (576,123,335) (73,812,369) 114.7% 141.0% NET CASH FROM/(USED) INVESTING ACTIVITIES (408,386,329) 105,621,373 (514,007,702) (462,470,313) (542,230,486) (79,760,173) 117.2% 132.8% CASH FLOWS FROM FINANCING ACTIVITIES Receipts Borrowing long term/refinancing 265,561,160 0 265,561,160 265,561,160 299,373,302 33,812,142 112.7% 112.7% Increase / (decrease) in consumer deposits 0 0 0 0 12,182,156 12,182,156 0.0% 0.0% Increase / (decrease) in lease liability 0 0 0 0 797,625 797,625 0.0% 0.0% Payments Repayment of borrowing (179,726,243) 0 (179,726,243) (179,726,243) (173,300,310) 6,425,933 96.4% 96.4% NET CASH FROM/(USED) FINANCING ACTIVITIES 85,834,917 0 85,834,917 85,834,917 139,052,773 53,217,856 162.0% 162.0%

NET INCREASE/ (DECREASE) IN CASH HELD (47,571,620) 33,902,045 (224,912,320) (173,374,931) (163,246,325) 10,128,606 94% 343% Cash/cash equivalents at the year begin: 243,372,332 (183,990,084) 427,362,416 427,362,416 229,099,916 (198,262,500) 53.6% 94.1% Cash/cash equivalents at the year end: 195,800,711 (6,649,384) 202,450,096 253,987,485 65,853,591 (188,133,893) 25.9% 33.6%

127 APPENDIX C DISCLOSURES OF GRANTS AND SUBSIDIES IN TERMS OF SECTION 123 OF THE MFMA, 56 OF 2003

QUARTERLY RECEIPTS RESTATED QUARTERLY EXPENDITURE (CAPITAL & OPERATING) CLOSING OPENING BALANCE OPENING BALANCE 1 JULY 2018 BALANCE DESCRIPTION FUNDER RESTATEMENTS SEPTEMBER DECEMBER MARCH JUNE TOTAL SEPTEMBER DECEMBER MARCH JUNE TOTAL 30 JUNE 2019 1 JULY 2018 R R R R R R R R R R R R R

NATIONAL GOVERNMENT (UNCONDITIONAL GRANT) G/F : EQUITABLE SHARE National Government 1 (1) 0 (57,299,000) (45,839,000) (34,380,000) 0 (137,518,000) 39,358,717 48,449,380 49,709,902 1 137,518,000 0 1 (1) 0 (57,299,000) (45,839,000) (34,380,000) 0 (137,518,000) 39,358,717 48,449,380 49,709,902 1 137,518,000 0

NATIONAL GOVERNMENT (CONDITIONAL GRANT) G/F : MUNICIPAL INFRASTRUCTURE PROJECTS National Government 1 (1) 0 (6,750,000) (12,310,000) (15,424,000) 0 (34,484,000) 0 6,127,609 11,196,597 17,159,794 34,484,000 0 G/F : BUDGET REFORM PROGRAMME NATIONAL TREASURY National Government (7) 7 0 (1,550,000) 0 0 0 (1,550,000) 204,152 672,137 41,983 631,728 1,550,000 0 G/F : EPWP TOEKENING VIR INFRASTRUKPROJEKT CWL National Government 0 0 0 (1,110,000) (1,994,000) (1,329,000) 0 (4,433,000) 0 0 4,433,000 0 4,433,000 0 G/F : ELEKT MASTERPLAN (ROLL OVER) National Government (155) 155 (0) 0 0 0 0 0 0 0 0 0 0 (0) G/F : ELECTRIFICATION FUNDING (INEP) National Government (4) 4 0 (3,738,000) (2,000,000) 0 0 (5,738,000) 0 0 0 5,738,000 5,738,000 (0) G/F : ELECTRIFICATION FUNDING (INEP ROLL OVER) National Government 0 (0) 0 0 0 0 0 0 0 0 0 0 0 0 G/F : DROUGHT RELIEF National Government (10,643,587) 0 (10,643,587) 0 0 0 0 0 0 2,864,491 2,002,467 5,776,627 10,643,585 (3) G/F : RURAL DEVELOPMENT (SARON ROADS) National Government 0 0 0 0 0 (2,121,578) (7,946,365) (10,067,943) 0 0 0 9,428,619 9,428,619 (639,324) (10,643,752) 165 (10,643,587) (13,148,000) (16,304,000) (18,874,578) (7,946,365) (56,272,943) 204,152 9,664,237 17,674,047 38,734,767 66,277,203 (639,327)

PROVINCIAL GOVERNMENT (CONDITIONAL GRANT) G/F : CARTERVILLE HOUSING PROJECT Provincial Government (956,503) 0 (956,503) 0 0 0 0 0 0 0 0 0 0 (956,503) G/F : 1068 HUISE WD SKENKING Provincial Government (604,713) 0 (604,713) 0 0 0 0 0 0 0 0 263,014 263,014 (341,699) G/F : DROMMEDARIS ST EHP Provincial Government 0 0 0 (556,420) 0 (368,715) 0 (925,135) 3,060,060 1,969,174 (901,979) (3,934,535) 192,720 (732,415) G/F : P59 FAIRYLANDS INCOME Provincial Government (7,956,417) 0 (7,956,417) 0 (114,000) 0 0 (114,000) 0 0 0 578,379 578,379 (7,492,039) G/F : CHICARGO Provincial Government (8,500) 0 (8,500) 0 0 0 0 0 0 0 0 0 0 (8,500) G/F : NEW SIZAYAMA Provincial Government 0 0 0 0 (1,698,175) 0 0 (1,698,175) 0 0 0 781,337 781,337 (916,838) G/F : ERF 2220 (NOODKAMP) Provincial Government (802,653) 0 (802,653) 0 0 0 0 0 0 0 0 0 0 (802,653) G/F : GOUDA Provincial Government (762,363) 0 (762,363) 0 0 0 0 0 0 0 0 57,689 57,689 (704,674) G/F : DALJOSAPHAT TRANSFERS Provincial Government (453,180) 0 (453,180) 0 0 0 0 0 0 0 0 0 0 (453,180) G/F : KINGSTON / LANTANA Provincial Government 0 0 0 0 0 0 (1,545,838) (1,545,838) 0 0 0 1,545,838 1,545,838 (0) G/F : SIYASHALA Provincial Government 0 0 0 0 0 0 (27,794) (27,794) 0 0 0 0 27,794 0 G/F : KINGSTON TOWN TRANSFERS Provincial Government 0 0 0 0 0 0 (24,000) (24,000) 0 0 0 0 0 (24,000) G/F : PAARL EAST HOUSING PROJECT Provincial Government (85,078) 0 (85,078) (1,752,948) 0 0 140,064 (1,612,884) 0 0 0 1,376,991 1,376,991 (320,971) G/F : DROMMEDARIS ST EHP Provincial Government 0 0 0 (140,064) 0 0 0 (140,064) 0 0 0 0 0 (140,064) G/F : HOUSING SCHEME 49 Provincial Government (130,183) 0 (130,183) 0 0 0 (1,132,404) (1,132,404) 0 0 0 0 0 (1,262,587) G/F : AMSTELHOF PROJECT 35 Provincial Government (10,348) 0 (10,348) 0 0 0 0 0 0 0 0 0 0 (10,348) G/F : CHESTER WILLIAMS & PAARL LOVERS LANE Provincial Government (383,312) 0 (383,312) 0 0 0 0 0 0 0 0 0 0 (383,312) G/F : LG GRADUATE INTERNSHIP Provincial Government (60,000) 0 (60,000) 0 0 0 0 0 0 0 0 60,000 60,000 0 G/F : NCEDOLWETHU/CHRIS HANI Provincial Government (2,000) 0 (2,000) 0 0 0 0 0 0 0 0 0 0 (2,000) G/F : HUMAN SETTLEMENTS Provincial Government 0 0 0 0 0 0 (672,000) (672,000) 0 0 0 0 0 (672,000) G/F : DALJOSAPAHT (PHASE 1-3) Provincial Government (90,000) 0 (90,000) 0 0 0 0 0 0 0 0 0 0 (90,000) G/F : VLAKKELAND BASIC SERVICES (IN-KIND) Provincial Government 0 0 0 0 0 0 (23,793,656) (23,793,656) 0 0 0 23,793,656 23,793,656 0 G/F : VLAKKELAND Provincial Government (10,572,400) 5,986,706 (4,585,694) 0 0 0 (10,000,000) (10,000,000) 0 8,295,478 1,124,587 5,165,629 14,585,694 0 G/F : VLAKKELAND Provincial Government 0 0 0 0 (17,325,000) 0 0 (17,325,000) 0 0 0 0 9,925,806 (7,399,194) G/F : TITLE DEEDS Provincial Government 0 0 0 0 0 (2,784,000) 0 (2,784,000) 0 0 0 0 0 (2,784,000) G/F : LIBRARY SERVICES CONDITIONAL GRANT Provincial Government (57,295) 0 (57,295) (10,578,666) 0 (11,157,334) 0 (21,736,000) 7,135,322 4,897,252 0 9,670,836 21,703,410 (89,885) G/F : COMMUNITY DEVELOPMENT SUPPORT GRANT Provincial Government (516,212) 0 (516,212) 0 0 0 0 0 0 0 0 0 0 (516,212) G/F : OTHER UNSPECIFIED Provincial Government (13) 13 0 0 0 0 0 0 0 0 0 0 0 0 G/F : OTHER UNSPECIFIED Provincial Government (8) 8 0 0 0 0 0 0 0 0 0 0 0 0 G/F : MAINTENANCE AND CONSTRUCTION OF TRANSPORT INFRASTRUCTURE Provincial Government 200 (200) (0) 0 0 (38,000,000) (618,862) (38,618,862) 0 24,908,496 8,134,782 5,575,584 38,618,861 (0) G/F : DEVELOPMENT OF SPORT AND RECREATION FACILITIES Provincial Government 0 0 0 0 0 0 (228,098) (228,098) 0 140,000 0 21,000 161,000 (67,098) G/F : SPORTFONDS Provincial Government (4,919) 4,919 0 0 0 0 0 0 0 0 0 0 0 0 G/F : FMG WESTERN CAPE Provincial Government (60,000) 0 (60,000) 0 0 0 0 0 0 0 0 0 0 (60,000) G/F : MANDELA ROUTE Provincial Government (15,000) 0 (15,000) 0 0 0 0 0 0 0 0 0 0 (15,000) G/F : MUNICIPAL DISASTER GRANT Provincial Government (21,615,960) 0 (21,615,960) 0 0 0 0 0 0 11,368,930 2,957,755 7,289,275 21,615,960 (0) G/F : FINANCIAL MANAGEMENT SUPPORT Provincial Government 0 0 0 0 0 (255,000) 0 (255,000) 0 0 0 255,000 255,000 0 G/F : FINANCIAL MANAGEMENT CAPACITY BUILDING Provincial Government 0 0 0 0 (360,000) 0 0 (360,000) 0 0 12,000 227,195 239,195 (120,805) G/F : LG GRADUATE INTERNSHIP Provincial Government 0 0 0 0 0 (72,000) (66,000) (138,000) 0 0 0 98,431 98,431 (39,569) G/F : FIRE SERVICES CAPACITY BUILDING Provincial Government 0 0 0 0 (1,483,000) 0 0 (1,483,000) 0 0 0 1,483,000 1,483,000 (0) G/F : CAPACITY BUILDING Provincial Government (179,751) 0 (179,751) 0 0 0 0 0 0 0 0 0 0 (179,751) (45,326,607) 5,991,445 (39,335,162) (13,028,098) (20,980,175) (52,637,049) (37,968,588) (124,613,909) 10,195,382 51,579,331 11,327,145 54,308,318 137,363,775 (26,585,296) OTHER GRANTS : (UNCONDITIONAL) G/F : TRAINING LEVY Other (730,908) 0 (730,908) (66,000) (530,257) (165,564) (327,349) (1,089,170) 0 0 0 1,692,381 1,692,381 (127,697) G/F: EMERGENCY KITS:O R THAMBOINF SETTLE Other (1,191,615) 0 (1,191,615) 0 0 0 0 0 0 0 0 0 0 (1,191,615) G/F : DE KRAAL Other 0 0 0 0 0 (964,748) 0 (964,748) 0 0 0 0 0 (964,748) G/F : NUMARKT Other (561,041) 0 (561,041) (66,314) 0 (89,190) 0 (155,505) 0 0 75,829 82,373 158,202 (558,344) G/F : CAPE WINELANDS Other (300,000) 0 (300,000) 0 0 0 0 0 0 0 0 0 0 (300,000) (2,783,564) 0 (2,783,564) (132,314) (530,257) (1,219,502) (327,349) (2,209,423) 0 0 75,829 1,774,754 1,850,583 (3,142,404) GUARANTEES AND DONATIONS G/F : COLIN D BROWN GUARANTEE PIPELINE BUILD Other (1,300,000) 1,300,000 (0) 0 0 0 0 0 0 0 0 0 0 (0) G/F : BO-LANG STREET Other 0 0 0 0 0 0 (3,108,919) (3,108,919) 0 0 0 3,108,919 3,108,919 0 G/F : UNSPENT MONEY PROJECT 59 (GUARANTEE) Other (623,636) 0 (623,636) 0 0 0 0 0 0 0 0 0 0 (623,636) G/F : TRUST FUND : MUN WEDUWEE & WESE PENSIOEN Other (363,572) 0 (363,572) 0 0 0 0 0 0 0 0 0 0 (363,572) G/F : GUARANTEE : D V RENSBURG (BURGERS DR) Other (38,488) 38,488 0 0 0 0 0 0 0 0 0 0 0 0 (2,325,696) 1,338,488 (987,208) 0 0 0 (3,108,919) (3,108,919) 0 0 0 3,108,919 3,108,919 (987,208) (61,079,620) 7,330,098 (53,749,522) (83,607,412) (83,653,432) (107,111,130) (49,351,220) (323,723,194) 49,758,251 109,692,947 78,786,923 97,926,758 346,118,480 (31,354,236)

128